Chapter 1  

1) Which of the following statements below shows the contrast between data and information?

A) Data is the output of an AIS.

B) Information is the primary output of an AIS.

C) Data is more useful in decision-making than information.

D) Data and information are the same.

Answer:  B

Page Ref: 4

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

2) Information is

A) basically the same as data.

B) raw facts about transactions.

C) potentially useful facts when processed in a timely manner.

D) data that has been organized and processed so that it’s meaningful.

Answer:  D

Page Ref: 4

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

3) The value of information can best be defined as

A) how useful it is to decision makers.

B) the benefits produced by possessing and using the information minus the cost of producing it.

C) how relevant it is.

D) the extent to which it maximizes the value chain.

Answer:  B

Page Ref: 4

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Analytic

4) An accounting information system (AIS) processes ________ to provide users with ________.

A) data; information

B) data; transactions

C) information; data

D) data; benefits

Answer:  A

Page Ref: 10

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

5) Information that reduces uncertainty, improves decision makers’ ability to make predictions, or confirms or corrects their prior expectations, is said to be

A) complete.

B) relevant.

C) reliable.

D) timely.

Answer:  B

Page Ref: 5

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

6) Information that is free from error or bias and accurately represents the events or activities of the organization is

A) relevant.

B) reliable.

C) verifiable.

D) timely.

Answer:  B

Page Ref: 5

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

7) Information that does not omit important aspects of the underlying events or activities that it measures is

A) complete.

B) accessible.

C) relevant.

D) timely.

Answer:  A

Page Ref: 5

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

8) When two knowledgeable people acting independently each produce the same information, this information is said to be

A) complete.

B) relevant.

C) reliable.

D) verifiable.

Answer:  D

Page Ref: 5

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

9) Data must be converted into information to be considered useful and meaningful for decision-making. There are six characteristics that make information both useful and meaningful. If information is free from error or bias and accurately represents the events or activities of the organization, it is representative of the characteristic of

A) relevancy.

B) timeliness.

C) understandability.

D) reliability.

Answer:  D

Page Ref: 5

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

10) An accounting information system must be able to perform which of the following tasks?

A) collect transaction data

B) process transaction data

C) provide adequate controls

D) all of the above

Answer:  D

Page Ref: 10

Objective:  Learning Objective 5

Difficulty :  Easy

AACSB:  Analytic

11) Which of the following is not an example of a common activity in an AIS?

A) buy and pay for goods and services

B) sell goods and services and collect cash

C) summarize and report results to interested parties

D) recording of sales calls for marketing purposes

Answer:  D

Page Ref: 8

Objective:  Learning Objective 5

Difficulty :  Easy

AACSB:  Analytic

12) Which of the following is not one of the components of an AIS?

A) Internal controls and security measures

B) People

C) Procedures and instructions

D) Hardware

Answer:  D

Page Ref: 10

Objective:  Learning Objective 5

Difficulty :  Easy

AACSB:  Analytic

13) One group that relies on both the adequate collection and transformation of data for decision-making purposes for an organization is

A) management.

B) interested outsiders.

C) competitors.

D) the government.

Answer:  A

Page Ref: 12

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

14) The primary objective of accounting is to

A) implement strong internal controls.

B) provide useful information to decision makers.

C) prepare financial statements.

D) ensure the profitability of an organization.

Answer:  B

Page Ref: 12

Objective:  Learning Objective 5

Difficulty :  Moderate

AACSB:  Analytic

15) The American Institute of Certified Public Accountants (AICPA) has recognized the importance of AIS and the major impact information technology has on the area of accounting. To recognize individual CPAs who have met educational and experiential requirements in this area, the group formally created the designation known as

A) the Certified Management Accountant.

B) the Certified Information Technology Professional.

C) the Certified Internal Auditor.

D) the Certified Data Processing Professional.

Answer:  B

Page Ref: 11

Objective:  Learning Objective 6

Difficulty :  Moderate

AACSB:  Analytic

16) The AIS must include controls to ensure

A) safety and availability of data.

B) marketing initiatives match corporate goals.

C) information produced from data is accurate.

D) both A and C

Answer:  D

Page Ref: 10

Objective:  Learning Objective 6

Difficulty :  Easy

AACSB:  Analytic

17) A change in the AIS that makes information more easily accessible and widely available within an organization is most likely to first influence the

A) organizational culture.

B) customer base.

C) external financial statement users.

D) production activity.

Answer:  A

Page Ref: 13

Objective:  Learning Objective 7

Difficulty :  Easy

AACSB:  Analytic

18) The process of creating value for customers is the result of nine activities that form a

A) value chain.

B) profitable operation.

C) successful business.

D) support system.

Answer:  A

Page Ref: 13

Objective:  Learning Objective 8

Difficulty :  Easy

AACSB:  Analytic

19) The value chain concept is composed of two types of activities known as

A) primary and support.

B) primary and secondary.

C) support and value.

D) technology and support.

Answer:  A

Page Ref: 13-14

Objective:  Learning Objective 8

Difficulty :  Moderate

AACSB:  Analytic

20) Which of the following is a primary activity in the value chain?

A) infrastructure

B) technology

C) purchasing

D) marketing and sales

Answer:  D

Page Ref: 14

Objective:  Learning Objective 8

Difficulty :  Easy

AACSB:  Analytic

21) In value chain analysis, what is the activity of arranging the delivery of products to customers called?

A) outbound logistics

B) inbound logistics

C) shipping

D) delivery

Answer:  A

Page Ref: 14

Objective:  Learning Objective 8

Difficulty :  Moderate

AACSB:  Analytic

22) An AIS provides value by

A) improving products or services through information that increases quality and reduces costs.

B) providing timely and reliable information to decision makers.

C) creating new products.

D) both A and B

Answer:  D

Page Ref: 11

Objective:  Learning Objective 6

Difficulty :  Easy

AACSB:  Analytic

23) In Chapter 1, Figure 1-4 shows the factors that influence the design of AIS. The diagram shows a bi-directional arrow between the organizational culture and the AIS. The reason for this two-way interchange between organizational culture and AIS is

A) that the AIS should not influence the values of the organizational culture.

B) because the organization’s culture influences the AIS, and likewise the AIS influences the organization’s culture by controlling the flow of information within the organization.

C) due to the transfer of managers between the two corporate elements.

D) the AIS impacts the organization’s key strategies.

Answer:  B

Page Ref: 13

Objective:  Learning Objective 7

Difficulty :  Easy

AACSB:  Analytic

24) An example of inbound logistics would consist of

A) the activities that transform inputs into final products or services.

B) the activities that help customers to buy the organization’s products or services.

C) the activities that provide post-sale support to customers.

D) the activities that consist of receiving, storing, and distributing the materials used as inputs by the organization to create goods and/or services it sells.

Answer:  D

Page Ref: 13

Objective:  Learning Objective 8

Difficulty :  Easy

AACSB:  Analytic

25) A good example of how an AIS is used to share knowledge within an organization is

A) the use of a corporate database to help staff identify the relevant experts who can help with a particular client.

B) the use of laptop computers to access a network for messaging worldwide.

C) the monitoring of production equipment to watch for defects.

D) the use of point-of-sale data to determine hot-selling items.

Answer:  A

Page Ref: 11

Objective:  Learning Objective 6

Difficulty :  Moderate

AACSB:  Analytic

26) One activity within the value chain is research and development. This activity can be identified as a

A) firm infrastructure activity.

B) human resources activity.

C) technology activity.

D) purchasing activity.

Answer:  C

Page Ref: 14

Objective:  Learning Objective 8

Difficulty :  Moderate

AACSB:  Analytic

27) When the AIS provides information in a timely and accurate manner, it stands as an example of

A) improved decision making.

B) improving the quality and reducing the costs of products or services.

C) improving efficiency.

D) all of the above

Answer:  D

Page Ref: 11

Objective:  Learning Objective 6

Difficulty :  Easy

AACSB:  Analytic

28) Accounting information plays major roles in managerial decision making by

A) identifying situations requiring management action.

B) reducing uncertainty.

C) providing a basis for choosing among alternative actions.

D) all of the above

Answer:  D

Page Ref: 12

Objective:  Learning Objective 6

Difficulty :  Easy

AACSB:  Analytic

29) A well-designed AIS can improve the decision-making function within the organization. Which statement below would describe a limitation, rather than a benefit, of an efficient AIS?

A) An AIS reduces uncertainty, and therefore accounting information can provide a basis for choosing among alternative courses of action.

B) An AIS identifies situations requiring management action.

C) An AIS provides to its users an abundance of information without any filtering or condensing of such information.

D) An AIS provides information about the results of previous decisions which provides decision makers with feedback that can be used in future decision making.

Answer:  C

Page Ref: 12

Objective:  Learning Objective 6

Difficulty :  Easy

AACSB:  Analytic

30) Jill Fredson is in charge of the mail room at Gammon University. Every Friday morning she receives a report via email that summarizes the number of outgoing and incoming pieces of mail by source and destination department. Every Friday afternoon, Jill deletes the report without reading it because it has no bearing on mail room operations. Which of the following characteristics of useful information is absent in the situation described above?

A) Relevant

B) Reliable

C) Complete

D) Timely

E) Understandable

F) Verifiable

G) Accessible

Answer:  A

Page Ref: 5

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Analytic

31) Inventory information is provided in real time by a firm’s accounting information system. The accuracy of this information is questionable, however, since the production manager often reports stock outs of components that the system indicates are in stock. Which of the following characteristics of useful information is absent in the situation described above?

A) Relevant

B) Reliable

C) Complete

D) Timely

E) Understandable

F) Verifiable

G) Accessible

Answer:  B

Page Ref: 5

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Analytic

32) Joe Marzetti has been the controller of Fairview Tires for 25 years. Ownership of the firm recently changed hands and the new owners are conducting an audit of the financial records. The audit has been unable to reproduce financial reports that were prepared by Marzetti. While there is no evidence of wrongdoing, the auditors are concerned that the discrepancies might contribute to poor decisions. Which of the following characteristics of useful information is absent in the situation described above?

A) Relevant

B) Reliable

C) Complete

D) Timely

E) Understandable

F) Verifiable

G) Accessible

Answer:  F

Page Ref: 5

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Analytic

33) In 2003, Custer Manufacturing implemented a Web-based information system that allows all employees to access mission-critical information. The intention was to increase production efficiency. Unfortunately, it had the opposite effect, as deliveries fell behind schedule and costs increased. Jeff Akspen, the director of information technology services, asked Joyce Jenkins to come in and talk with him about the system. Joyce is a long-time employee of Custer, and her opinion is valued by her peers and by her supervisor. “So Joyce, how’s it going down there in the shop?””Not so good, Jeff. Used to be we got a weekly pick list so we knew how to plan production. Now, we got that computer system. Most of us can’t figure out how to use it to do our jobs. Is there some way to print out a pick list?”Jeff thought for a while before responding. “Well, Joyce, to tell you the truth, I’m not so sure how to do it myself, but there must be a way. We’ll bring in the consultants that helped us build the system. Maybe they can help.” Which of the following characteristics of useful information is absent in the situation described above?

A) Relevant

B) Reliable

C) Complete

D) Timely

E) Understandable

F) Verifiable

G) Accessible

Answer:  E

Page Ref: 5

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Analytic

34) Razzmataz, Wisconsin, is a popular tourist destination. During the winter months, the population dwindles to a meager few, but when summer comes, the size of the town surges. Chuck Hewitt is the town sanitation engineer. When the size of the town surges, so do his responsibilities. Among them is management of the sewage processing volume.In an interview with the local paper, Chuck complained that a report on tourist population that he uses to adjust processing volume refers to data that was collected five days ago and it takes him a week to make adjustments.Which of the following characteristics of useful information is absent in the situation described above?

A) Relevant

B) Reliable

C) Complete

D) Timely

E) Understandable

F) Verifiable

G) Accessible

Answer:  D

Page Ref: 5

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Analytic

35) A frantic Stro Frinzel called the home office from Des Moines.”You have got to help me. I am about to close a great sale, but I have to be able to guarantee delivery by the fourteenth. I can’t get through to the company Web site to verify delivery!””Thank you for calling. Your call is very important to us. However, all of our lines are currently in use. Please try again later.”Which of the following characteristics of useful information is absent in the situation described above?

A) Relevant

B) Reliable

C) Complete

D) Timely

E) Understandable

F) Verifiable

G) Accessible

Answer:  G

Page Ref: 5

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

36) Message left on an answering machine: “Hi Bob! Just got into town. How about dinner this evening if you’re available. Call me!”Which of the following characteristics of useful information is absent in the situation described above?

A) Relevant

B) Reliable

C) Complete

D) Timely

E) Understandable

F) Verifiable

G) Accessible

Answer:  C

Page Ref: 5

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Analytic

37) Robinson Crusoe has formed a business that sells carved gourmet coconuts. He has hired five employees. The most senior is Friday, who manages the carving process. Monday is the newest employee. She collects the coconuts. Tuesday, as you might expect, takes calls from curstomers, oops, I mean customers, who are unhappy with their coconuts. Wednesday tosses finished coconuts into the sea, whereupon they drift to the wholesaler. Thursday sends smoke signals to the wholesaler extolling the virtues of the latest production run of nuts that are drifting across the bay.Which of the following functions in the value chain is Monday performing?

A) Inbound logistics

B) Operations

C) Outbound logistics

D) Marketing and sales

E) Service

Answer:  A

Page Ref: 13

Objective:  Learning Objective 8

Difficulty :  Moderate

AACSB:  Analytic

38) Robinson Crusoe has formed a business that sells carved gourmet coconuts. He has hired five employees. The most senior is Friday, who manages the carving process. Monday is the newest employee. She collects the coconuts. Tuesday, as you might expect, takes calls from curstomers, oops, I mean customers, who are unhappy with their coconuts. Wednesday tosses finished coconuts into the sea, whereupon they drift to the wholesaler. Thursday sends smoke signals to the wholesaler extolling the virtues of the latest production run of nuts that are drifting across the bay.Which of the following functions in the value chain is Friday performing?

A) Inbound logistics

B) Operations

C) Outbound logistics

D) Marketing and sales

E) Service

Answer:  B

Page Ref: 13

Objective:  Learning Objective 8

Difficulty :  Moderate

AACSB:  Analytic

39) Robinson Crusoe has formed a business that sells carved gourmet coconuts. He has hired five employees. The most senior is Friday, who manages the carving process. Monday is the newest employee. She collects the coconuts. Tuesday, as you might expect, takes calls from curstomers, oops, I mean customers, who are unhappy with their coconuts. Wednesday tosses finished coconuts into the sea, whereupon they drift to the wholesaler. Thursday sends smoke signals to the wholesaler extolling the virtues of the latest production run of nuts that are drifting across the bay.Which of the following functions in the value chain is Wednesday performing?

A) Inbound logistics

B) Operations

C) Outbound logistics

D) Marketing and sales

E) Service

Answer:  C

Page Ref: 14

Objective:  Learning Objective 8

Difficulty :  Moderate

AACSB:  Analytic

40) Robinson Crusoe has formed a business that sells carved gourmet coconuts. He has hired five employees. The most senior is Friday, who manages the carving process. Monday is the newest employee. She collects the coconuts. Tuesday, as you might expect, takes calls from curstomers, oops, I mean customers, who are unhappy with their coconuts. Wednesday tosses finished coconuts into the sea, whereupon they drift to the wholesaler. Thursday sends smoke signals to the wholesaler extolling the virtues of the latest production run of nuts that are drifting across the bay.Which of the following functions in the value chain is Thursday performing?

A) Inbound logistics

B) Operations

C) Outbound logistics

D) Marketing and sales

E) Service

Answer:  D

Page Ref: 14

Objective:  Learning Objective 8

Difficulty :  Easy

AACSB:  Analytic

41) Robinson Crusoe has formed a business that sells carved gourmet coconuts. He has hired five employees. The most senior is Friday, who manages the carving process. Monday is the newest employee. She collects the coconuts. Tuesday, as you might expect, takes calls from curstomers, oops, I mean customers, who are unhappy with their coconuts. Wednesday tosses finished coconuts into the sea, whereupon they drift to the wholesaler. Thursday sends smoke signals to the wholesaler extolling the virtues of the latest production run of nuts that are drifting across the bay.Which of the following functions in the value chain is Tuesday performing?

A) Inbound logistics

B) Operations

C) Outbound logistics

D) Marketing and sales

E) Service

Answer:  E

Page Ref: 14

Objective:  Learning Objective 8

Difficulty :  Moderate

AACSB:  Analytic

42)

Refer to the chart above. At what point, measured in terms of the net cost of information, does information overload begin?

A) 0

B) 5

C) 10

D) 12

Answer:  C

Page Ref: 4

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

43) Tri-Anything, Limited, is a British company operating in New York state. It offers stylized, boutique public relations services to upscale retailers in quaint New England towns. A major source of revenue is a weekly newsletter that reports on current and projected tourist travel and spending patterns. Preparation of the newsletter requires study and analysis of weather conditions, economic activity, and travel costs. It is available at an annual subscription rate of $299.99. There are currently 190 subscribers. Preparation and distribution of the newsletter costs $12,000 annually. The value of information to subscribers is:

A) $236.83

B) $44,998.10

C) Less than $63.16

D) At least $300.00

Answer:  D

Page Ref: 4

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

44) Many modern accounting software packages offer separate transaction cycle modules. What is the reason for this?

A) Every organization does not need to implement all of the available transaction cycle modules.

B) Most businesses do not need the revenue cycle module as part of their AIS.

C) The nature of a given transaction cycle is the same irrespective of the type of organization.

D) A properly designed AIS does not use the concept of separate business transaction cycles to process transactions.

Answer:  A

Page Ref: 9

Objective:  Learning Objective 5

Difficulty :  Moderate

AACSB:  Analytic

45) The business owners obtain financing from outside investors, which results in an inflow of cash into the company. This transaction is considered to be part of which cycle?

A) the revenue cycle

B) the payroll cycle

C) the production cycle

D) the financing cycle

Answer:  D

Page Ref: 7-8

Objective:  Learning Objective 4

Difficulty :  Easy

AACSB:  Analytic

46) Which of the following is not a transaction cycle?

A) revenue

B) expenditure

C) human resources

D) general ledger and reporting

Answer:  D

Page Ref: 7-9

Objective:  Learning Objective 4

Difficulty :  Moderate

AACSB:  Analytic

47) Which of the following statements is false?

A) Retail stores do not have a production cycle.

B) Financial institutions have installment-loan cycles.

C) A service company does not have an inventory system.

D) Every organization should implement every transaction cycle module.

Answer:  D

Page Ref: 9

Objective:  Learning Objective 4

Difficulty :  Easy

AACSB:  Analytic

48) Transaction cycles can be summarized on a high level as “give-get” transactions. An example of “give-get” in the expenditure cycle would be

A) give cash, get cash.

B) give cash, get goods.

C) give cash, get labor.

D) give goods, get cash.

Answer:  B

Page Ref: 7

Objective:  Learning Objective 4

Difficulty :  Easy

AACSB:  Analytic

49) Transaction cycles can be summarized on a high level as “give-get” transactions. An example of “give-get” in the revenue cycle would be

A) give cash, get goods.

B) give goods, get cash.

C) give cash, get labor.

D) give cash, get cash.

Answer:  B

Page Ref: 7

Objective:  Learning Objective 4

Difficulty :  Easy

AACSB:  Analytic

50) Groups of related business activities such as the acquisition of merchandise and payment of vendors are called

A) transaction cycles.

B) economic cycles.

C) business events.

D) transactions.

Answer:  A

Page Ref: 6-7

Objective:  Learning Objective 4

Difficulty :  Easy

AACSB:  Analytic

51) Which of the following is a true statement?

A) Business strategy directly influences AIS, but not information technology.

B) Information technology directly influences organizational culture, but not business strategy.

C) Organizational culture directly influences business strategy, but not AIS.

D) AIS directly influences information technology, but not business strategy.

Answer:  A

Page Ref: 13

Objective:  Learning Objective 7

Difficulty :  Difficult

AACSB:  Analytic

52) The transaction cycle that includes the events of hiring employees and paying them is known as the

A) revenue cycle.

B) expenditure cycle.

C) human resources cycle.

D) financing cycle.

Answer:  C

Page Ref: 7-8

Objective:  Learning Objective 4

Difficulty :  Easy

AACSB:  Analytic

53) The transaction cycle approach leads to efficient processing of a large number of transactions because

A) transaction cycles are easier to computerize.

B) a large number of transactions within a given cycle can be categorized into a relatively small number of distinct types.

C) the transaction cycle approach represents the natural order of business.

D) transaction cycles are easy to understand.

Answer:  B

Page Ref: 7

Objective:  Learning Objective 4

Difficulty :  Moderate

AACSB:  Analytic

54) Which of the following is not an example of how an AIS adds value to an organization?

A) All employees at a hospital can access and update patient records from any computer terminal in the hospital.

B) A customer service representative can find a customer’s account data, purchase history, payment history, and salesperson’s name while on the phone with the customer, to resolve issues quickly.

C) Suppliers are able to access sales data directly from the point-of-sale system of a retailer and deliver inventory automatically when needed.

D) Client tax files are encrypted and made available on the CPA firm’s network to any employee with an access code.

Answer:  A

Page Ref: 11

Objective:  Learning Objective 6

Difficulty :  Difficult

AACSB:  Analytic

55) Rolleigh Corp. identifies growth by new product development and product improvement as the number one corporate goal. An employee at Wrigley’s, one of Rolleigh’s wholly-owned subsidiaries, developed an innovation to an existing product that would directly address a shortcoming in the similar product offered by Rolleigh’s closest competitor. Wrigley’s current Return on Investment (ROI) is 15%, but the product innovation is expected to generate ROI of only 12%. Awarding bonuses to subsidiary managers based on ROI could result in:

A) goal conflict

B) information overload

C) goal congruence

D) decreased value of information

Answer:  A

Page Ref: 4

Objective:  Learning Objective 1

Difficulty :  Difficult

AACSB:  Analytic

56) Which of the following tradeoffs between characteristics of useful information is least objectionable?

A) Incomplete information received on a timely basis

B) Irrelevant information received in an understandable format

C) Unreliable information easily accessible

D) Verifiable information received in unreadable format

Answer:  A

Page Ref: 5

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Analytic

57) Paid time-off policies, job descriptions, and procedures manuals are examples of information needed to support key decisions in what business process?

A) Hire and train employees

B) Acquire inventory

C) Sell merchandise

D) Collect payment from customers

Answer:  A

Page Ref: 6

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

58) Which of the following is not a key decision to be made when starting a business?

A) How to estimate the allowance for uncollectible accounts

B) Whether to advertise on TV, radio, or newspaper

C) How to raise capital

D) Whether to accept American Express

Answer:  A

Page Ref: 5

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Analytic

59) Paying federal payroll taxes is part of which transaction cycle?

A) Human resources/payroll

B) Expenditure

C) Financing

D) Revenue

Answer:  A

Page Ref: 8

Objective:  Learning Objective 4

Difficulty :  Moderate

AACSB:  Analytic

60) Who of the following would not be involved in the revenue cycle?

A) Accounts payable clerk

B) Customer

C) Cashier

D) Credit manager

Answer:  A

Page Ref: 7-8

Objective:  Learning Objective 4

Difficulty :  Easy

AACSB:  Analytic

61) Which of the following is not one of the three basic types of data about a specific sales transaction that should be captured by an Accounting Information System?

A) Name of the employee who completed the sale

B) Daily sales quota

C) Product sold

D) Date

Answer:  B

Page Ref: 4

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

62) Who of the following is not a stakeholder with whom an accounting information system typically communicates directly?

A) Wall Street industry analyst

B) Venture capitalist

C) Company that supplies raw materials

D) Company that purchases finished goods for resale to consumers

Answer:  A

Page Ref: 6

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Analytic

63) Define the concept of a system.

Answer:  A system is a set of two or more components that are somehow interrelated and interact together to achieve a specific goal.

Page Ref: 4

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

64) Define data, information, and how the value of information is determined.

Answer:  Data: facts that are collected, entered, recorded, stored, and processed by an AIS. Information: data that has been organized and processed and is meaningful to its users. Such information is accessible, relevant, timely, reliable, verifiable, complete, and understandable. Information is of value when the benefits received from using or acting upon it outweighs the cost to produce the information.

Page Ref: 4

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

65) Define an accounting information system.

Answer:  An AIS is a system that collects, records, stores, and processes data to produce information for decision makers.

Page Ref: 10

Objective:  Learning Objective 5

Difficulty :  Easy

AACSB:  Analytic

66) Identify the components of an accounting information system.

Answer:  A well-designed AIS consists of people, procedures and instructions, data, software, information technology infrastructure, and internal controls and security measures.

Page Ref: 10

Objective:  Learning Objective 5

Difficulty :  Moderate

AACSB:  Analytic

67) What is the CITP designation and why is it important to AIS?

Answer:  The CITP designation stands for “Certified Information Technology Professional.” It is awarded to CPAs who have demonstrated a broad range of knowledge and skill sets in the areas of accounting and information systems and technology. The AICPA (American Institute of CPAs) has acknowledged the importance and close relationship that accounting and information systems share in creating this specialty designation for accounting information system professionals.

Page Ref: 11

Objective:  Learning Objective 6

Difficulty :  Easy

AACSB:  Analytic

68) Differentiate between an AIS course and other accounting courses.

Answer:  Other accounting courses assume the preparation or reporting of accounting information is for external or internal users. However, the AIS course focuses on the flow of accounting information in the organization from a systems perspective. The AIS course traces the origin, processing, storing, and ultimate disposal of information. An AIS course also focuses on business processes, organization structure, information systems, and corporate planning and goals.

Page Ref: 10-12

Objective:  Learning Objective 6

Difficulty :  Difficult

AACSB:  Analytic

69) What is the purpose behind the five primary activities in the value chain?

Answer:  The goal of the five primary activities in the value chain is to facilitate the business in providing value to its customers. The five primary activities allow the business to create, market, and deliver its products and services to its customers, as well as providing postsale support.

Page Ref: 13

Objective:  Learning Objective 8

Difficulty :  Moderate

AACSB:  Analytic

70) How can an AIS add value to the organization?

Answer:  An AIS can increase the efficiency and effectiveness of the value chain by improving the quality and lowering costs of products or services, improving efficiency of operations, improving decision making, enhancing the sharing of knowledge, improving the efficiency and effectiveness of its supply chain and improving the internal control structure.

Page Ref: 11-12

Objective:  Learning Objective 6

Difficulty :  Moderate

AACSB:  Analytic

71) How can a well-designed AIS improve the efficiency and effectiveness of a company’s value chain?

Answer:  The AIS can be designed to allow customers direct access to a company’s inventory and sales order entry systems. This allows the customer to do more of the work that traditionally has been done by sales, marketing, and administration personnel. This allows for faster ordering, and cuts the company’s labor costs. It may also have the effect of allowing the customer more control in a purchase transaction that may bring more satisfaction and value to the customer.

Page Ref: 11

Objective:  Learning Objective 8

Difficulty :  Moderate

AACSB:  Analytic

72) Discuss the concept of a system and the issues of goal conflict and goal congruence.

Answer:  A system is a set of two or more components that are somehow interrelated and interact together to achieve a specific goal. A system usually consists of smaller components called subsystems. These subsystems have specific and defined functions, which interact with and support the larger system. The concept of systems is key to information technology and AIS. All systems, including the AIS, must work to achieve one or more organizational goals. Goal conflict results when a decision or action of a subsystem is inconsistent with another subsystem or the system (organization) as a whole. Goal congruence results when a subsystem achieves its goals while contributing to the organization’s overall goal. Subsystems should maximize organizational goals.

Page Ref: 4

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Analytic

73) Discuss the seven characteristics of useful information.

Answer:  The seven characteristics of useful information are: relevant, reliable, complete, timely, understandable, verifiable and accessible. These characteristics are qualities that information should possess to be useful in a business environment. Briefly stated, in order for information to be useful it must be: 1) relevant, meaning that it reduces uncertainty and adds to the decision-making process; 2) reliable information is information that is free from error, and is accurate in its nature; 3) complete information is information that does not omit any important data, facts, or aspects about events or activities; 4) information is timely when it is fully available to enable the decision-making process to proceed; 5) understandable information must be both in an intelligible and useful format; 6) information is considered verifiable if two people, acting independently of each other, produce the same information or the same results. 7) Information is accessible if it is available to users when they need it and in a format they can use.

Page Ref: 5

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Analytic

74) Explain what an AIS is, describe the basic tasks it performs in an organization, and give some examples of the types of accounting transactions it processes.

Answer:  An AIS consists of six components: people, procedures and instructions, data, software, information technology infrastructure, and internal controls and security measures. The AIS performs three major functions: 1) it collects and stores data about activities and transactions so that the organization’s management, employees, and interested outsiders can review what has happened; 2) the AIS processes data (that is, facts that have been collected and stored) into information that is useful for making decisions, and is of value to the organization; and 3) the AIS provides adequate controls designed to safeguard the organization’s assets, including its data and information. Common examples of accounting transactions that an AIS helps to process and track are the sales of products to customers, cash collections, cash payments, and the recording and payment of the employees’ payroll.

Page Ref: 10

Objective:  Learning Objective 5

Difficulty :  Moderate

AACSB:  Analytic

75) Discuss the components of a supply chain.

Answer:  The supply chain shows how an organization interacts with suppliers, distributors, and customers to provide value in the products it sells. The supply chain depicts the creation and sale of a productthe chain is somewhat different when a service is involved. The supply chain has five components: raw materials; manufacturer; distributor; retailer; and the consumer. Raw materials come from any number of suppliers, which in turn become part of a manufacturing process, which produces a product. The business then provides the product to distributors, who in turn sell the product to retail businesses. The product is ultimately purchased and used by consumers (who may be individuals or businesses). It is important to realize that AIS can greatly impact the traditional supply chain by creating a more efficient and timely environment in which a business can operate. More efficient operations are more effective, which in turn lowers costs, and add greater value and create improved customer satisfaction.

Page Ref: 14-15

Objective:  Learning Objective 8

Difficulty :  Easy

AACSB:  Analytic

76) How can an AIS become part of the firm’s value chain and add value to the business?

Answer:  The AIS can add value by: helping to improve products and services an organization offers for sale; increasing the quality of products and services; creating greater efficiency by reducing costs and saving time; and improving the overall efficiency of the organization. Decision making is enhanced by the better availability of timely, complete, reliable, verifiable, and relevant information. A firm can enjoy a competitive advantage with better customer ordering, billing, and customer service made possible by an improved AIS. The AIS can also enhance overall communication and use of knowledge in a business by making the knowledge readily available to interested parties.

Page Ref: 11

Objective:  Learning Objective 6

Difficulty :  Moderate

AACSB:  Analytic

77) How can the value of the information produced by an accounting information system be determined? What would a measurement and verification expert think about quantification and verification of such information?

Answer:  A well-designed AIS improves the efficiency and effectiveness of the value chain by improving the quality and lowering the overall cost of products or services, improving efficiency of operations, improving decision making, and enhancing the sharing of knowledge. These are the benefits of possessing and using information. Drawbacks to possessing and using such information are the costs of obtaining and maintaining such information. These costs include investments in people, processes, and computing and networking hardware and software on an ongoing basis. Costs of the information are quantifiable to some extent. However, some of the benefits of using the information involve numerous estimates and assumptions. As such, the quantification of the benefits of utilizing such information depends on the accuracy of the assumptions.

Page Ref: 11

Objective:  Learning Objective 6

Difficulty :  Difficult

AACSB:  Analytic

78) Why have accounting software packages been designed with separate transaction modules?

Answer:  Since every organization does not necessarily use all of the transaction cycles in its operations, it is to the advantage of the organization to be able to “pick and choose” from among various software modules that track and record different transaction cycles. For example, a law firm would have no need to implement a production cycle module. Also, the nature of a transaction cycle varies across the broad spectrum of business organizations. Again, a law firm would have a revenue cycle, but it would not involve the purchase, receipt, and payment for products or merchandise; likewise a retail store chain may not sell any consulting services to its customers.

Page Ref: 9

Objective:  Learning Objective 5

Difficulty :  Easy

AACSB:  Analytic

79) How are “Give and Take” transactions classified in business today and what impact does this have on AIS?

Answer:  The concept of “Give and Take” transactions has been used to classify business transactions into “cycles” that have starting points, processes, and end points (or closure). The majority of business transactions can be classified as revenue, expenditure, human resources (payroll), production, and financing cycles. AIS has been modeled after these transaction cycles to achieve its basic functions of collecting and processing data, providing information useful for decision making, and establishing adequate controls.

Page Ref: 5-7

Objective:  Learning Objective 4

Difficulty :  Moderate

AACSB:  Analytic

Chapter 2  

1) What usually initiates data input into a system?

A) The transaction system automatically checks each hour to see if any new data is available for input and processing.

B) The performance of some business activity generally serves as the trigger for data input.

C) A general ledger program is queried to produce a trial balance at the end of an accounting period.

D) Data is only input when a source document is submitted to the accounting department.

Answer:  B

Page Ref: 26

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

2) An ERP system might facilitate the purchase of direct materials by all of the following except

A) selecting the best supplier by comparing bids.

B) preparing a purchase order when inventory falls to reorder point.

C) routing a purchase order to a purchasing agent for approval.

D) communicating a purchase order to a supplier.

Answer:  A

Page Ref: 37

Objective:  Learning Objective 5

Difficulty :  Moderate

AACSB:  Reflective Thinking

3) Which of the following is not true about the accounts receivable subsidiary ledger?

A) Debits and credits in the subsidiary ledger must always equal.

B) Every credit sale is entered individually into the subsidiary ledger.

C) The total of the subsidiary ledgers must equal the control account.

D) The subsidiary ledgers play an important role in maintaining the accuracy of the data stored in the AIS.

Answer:  A

Page Ref: 28

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

4) Which of the following is not usually a consideration when designing a coding system?

A) Government regulations on coding systems

B) Standardization

C) Future expansion needs

D) Facilitating report preparation

Answer:  A

Page Ref: 29

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

5) The general ledger

A) summarizes the transactions in journals.

B) only includes balance sheet accounts.

C) is posted in total to the general journal.

D) is the initial place to record depreciation expense.

Answer:  A

Page Ref: 28

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Reflective Thinking

6) For a retail business, a delivery of inventory, from a vendor (with whom there is an established credit relationship) would be initially recorded in which type of accounting record as part of which transaction cycle?

A) purchases journal; expenditure cycle

B) general journal; expenditure cycle

C) general ledger; expenditure cycle

D) cash disbursements journal; production cycle

Answer:  A

Page Ref: 31

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Reflective Thinking

7) Which of the following statements regarding special journals is not true?

A) The balances in a special journal must always reconcile to the general ledger.

B) Special journals are used to record large numbers of repetitive transactions.

C) Special journals are periodically summarized and posted to the general ledger.

D) Special journals provide a specialized format for recording similar transactions.

Answer:  A

Page Ref: 31

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

8) Changing an employee’s hourly wage rate would be recorded in which file?

A) Employee master file

B) Employee transaction file

C) Payroll master file

D) Payroll transaction file

Answer:  A

Page Ref: 32

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

9) A typical source document could be

A) in some paper form.

B) a computer data entry screen.

C) a notepad entry.

D) both A and B

Answer:  D

Page Ref: 27

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

10) Which step below is not considered to be part of the data processing cycle?

A) data input

B) feedback from external sources

C) data storage

D) data processing

Answer:  B

Page Ref: 26

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

11) Data must be collected about three facets of each business activity. What are they?

A) the business activity, the resources it affects, the people who participate

B) the business activity, the transactions it creates, the impact on the financial statements

C) the inputs, outputs and processes used

D) who is involved, what was sold, how much was paid

Answer:  A

Page Ref: 26

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

12) The issuing of a purchase order is part of which transaction cycle?

A) the revenue cycle

B) the production cycle

C) the human resources cycle

D) the expenditure cycle

Answer:  D

Page Ref: 27

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Analytic

13) The collection of job time tickets or time sheets is part of which transaction cycle?

A) revenue cycle

B) production cycle

C) human resources cycle

D) expenditure cycle

Answer:  C

Page Ref: 27

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Analytic

14) Common source documents for the revenue cycle include all of the following except

A) sales order.

B) receiving report.

C) delivery ticket.

D) credit memo.

Answer:  B

Page Ref: 27

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Analytic

15) Which of the following documents would be found in the expenditure cycle?

A) delivery ticket

B) time card

C) credit memo

D) purchase order

Answer:  D

Page Ref: 27

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Analytic

16) Documents that are sent to customers or suppliers and then sent back to the company in the course of a business transaction are known as

A) turnaround documents.

B) source documents.

C) source data automation.

D) transaction documents.

Answer:  A

Page Ref: 27

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

17) Which of the following is an example of source data automation?

A) a utility bill

B) POS (point-of-sale) scanners in retail stores

C) a bill of lading

D) a subsidiary ledger

Answer:  B

Page Ref: 27

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

18) Pre-numbering of source documents helps to verify that

A) all transactions have been recorded since the numerical sequence serves as a control.

B) source data automation was used to capture data.

C) documents have been used in order.

D) company policies were followed.

Answer:  A

Page Ref: 27-28

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Analytic

19) Source documents generally help to improve accuracy in transaction processing because

A) they specify which information to collect.

B) logically related data can be grouped in the same area of the document.

C) they provide directions and steps for completing the form.

D) All of the above are correct.

Answer:  D

Page Ref: 27

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

20) When the sum of all entries in the subsidiary ledger equals the balance in the corresponding general ledger account, it is assumed that

A) the recording processes were accurate.

B) all source documents were recorded.

C) adjusting entries are not required.

D) no errors exist in the subsidiary ledger.

Answer:  A

Page Ref: 28

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Analytic

21) The general ledger account that corresponds to a subsidiary ledger account is known as a

A) dependent account.

B) attribute account.

C) entity account.

D) control account.

Answer:  D

Page Ref: 28

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

22) Pre-numbered checks, invoices, and purchase orders are examples of

A) sequence codes.

B) block codes.

C) group codes.

D) mnemonic codes.

Answer:  A

Page Ref: 28

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

23) A chart of accounts is an example of (select all that apply)

A) sequence codes.

B) block codes.

C) group codes.

D) mnemonic codes.

Answer:  B, C

Page Ref: 28-29

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

24) Product items are often coded with (select all that apply)

A) sequence codes.

B) block codes.

C) group codes.

D) mnemonic codes.

Answer:  C, D

Page Ref: 28-29

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

25) Which of the following statements is false?

A) Codes should be consistent with intended use.

B) Codes should allow for growth.

C) Codes should be as simple as possible.

D) Codes should be customized for each division of an organization.

Answer:  D

Page Ref: 29

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

26) To be effective, the chart of accounts must

A) be as concise as possible.

B) begin with account 001.

C) utilize only one coding technique.

D) contain sufficient detail to meet the information needs of the organization.

Answer:  D

Page Ref: 29

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

27) The chart of accounts of a corporate retail bookstore would probably include

A) work-in-process inventory.

B) a drawing account.

C) retained earnings.

D) both A and C

Answer:  C

Page Ref: 29

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

28) In transaction processing, generally which activity comes first?

A) recording data in a journal

B) posting items to special journals

C) capturing data on source documents

D) recording data in a general ledger

Answer:  C

Page Ref: 26

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Analytic

29) The efficiency of recording numerous business transactions can be best improved by the use of

A) prenumbered source documents.

B) specialized journals.

C) posting references.

D) subsidiary ledgers.

Answer:  B

Page Ref: 31

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

30) A general journal

A) would be used to record monthly depreciation entries.

B) simplifies the process of recording large numbers of repetitive transactions.

C) records all detailed data for any general ledger account that has individual sub-accounts.

D) contains summary-level data for every account of the organization.

Answer:  A

Page Ref: 31

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

31) The general ledger

A) is used to record infrequent or non-routine transactions.

B) simplifies the process of recording large numbers of repetitive transactions.

C) records all detailed data for any general ledger account that has individual sub-accounts.

D) contains summary-level data for every account of the organization.

Answer:  D

Page Ref: 28

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Analytic

32) A subsidiary ledger

A) is used to record infrequent or non-routine transactions.

B) simplifies the process of recording large numbers of repetitive transactions.

C) records all detailed data for any general ledger account that has individual sub-accounts.

D) contains summary-level data for every account of the organization.

Answer:  C

Page Ref: 28

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Analytic

33) A specialized journal

A) is used to record infrequent or non-routine transactions.

B) simplifies the process of recording large numbers of repetitive transactions.

C) records all detailed data for any general ledger account that has individual sub-accounts.

D) contains summary-level data for every account of the organization.

Answer:  B

Page Ref: 31

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Analytic

34) An audit trail

A) provides the means to check the accuracy and validity of ledger postings.

B) begins with the general journal.

C) is automatically created in every computer-based information system.

D) is a summary of recorded transactions.

Answer:  A

Page Ref: 31

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

35) Concerning a master file, which of the following statements is false?

A) A master file is conceptually similar to a ledger in a manual AIS.

B) A master file stores cumulative information.

C) A master file exists across fiscal periods.

D) A master file’s individual records are rarely, if ever, changed.

Answer:  D

Page Ref: 32

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Analytic

36) Which of the following is conceptually similar to a journal in a manual AIS?

A) database

B) master file

C) record

D) transaction file

Answer:  D

Page Ref: 33

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

37) Which of the following statements is true?

A) Batch processing ensures that stored information is always current.

B) Batch input is more accurate than on-line data entry.

C) On-line batch processing is a combination of real-time and batch processing.

D) Batch processing not frequently used.

Answer:  C

Page Ref: 33-34

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

38) The data processing method used by FedEx to track packages is an example of

A) real-time processing.

B) batch processing.

C) online batch processing.

D) real-time batch processing.

Answer:  A

Page Ref: 34

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

39) Which statement below regarding the AIS is false?

A) The AIS must be able to provide managers with detailed and operational information about the organization’s performance.

B) Both traditional financial measures and operational data are required for proper and complete evaluation of performance.

C) The AIS was often just one of the information systems used by an organization to collect and process financial and nonfinancial data.

D) Traditionally, most AIS have been designed so that both financial and operational data are stored in a manner that facilitates their integration in reports.

Answer:  D

Page Ref: 34

Objective:  Learning Objective 4

Difficulty :  Moderate

AACSB:  Reflective Thinking

40) Callow Youth Clothing (CYC) is a boutique retailer located in Estes Park, Colorado. During the peak tourist season, it has average daily cash and credit card sales in excess of $5,000. What is the best way for CYC to ensure that sales data entry is efficient and accurate?

A) Well-designed paper forms

B) Source data automation

C) Turnaround documents

D) Sequentially numbered sales invoices

Answer:  B

Page Ref: 27

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Reflective Thinking

41) In Petaluma, California, electric power is provided to consumers by the Power To The People Electrical Company (PTTP), a local co-op. Each month PTTP mails bills to 70,000 households and then processes payments as they are received. What is the best way for this business to ensure that payment data entry is efficient and accurate?

A) Well-designed paper forms

B) Source data automation

C) Turnaround documents

D) Sequentially numbered bills

Answer:  C

Page Ref: 27

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Reflective Thinking

42) Callow Youth Clothing is a boutique retailer located in Estes Park, Colorado. It is a sole proprietorship that stocks an inventory of between 80 and 160 different products. Inventory is updated in real time by the AIS. When designing a chart of accounts for this business, what is the minimum number of digits necessary to represent the general ledger account code, including subsidiary ledgers?

A) 4

B) 6

C) 7

D) 9

Answer:  B

Page Ref: 29

Objective:  Learning Objective 3

Difficulty :  Difficult

AACSB:  Reflective Thinking

43) The quality assurance department at a large manufacturing business enters data into the AIS that is used to produce a weekly report that summarizes the proportion of defective units in each product line. This is an example of

A) internal financial information.

B) internal nonfinancial information.

C) external financial information.

D) external nonfinancial information.

Answer:  B

Page Ref: 34

Objective:  Learning Objective 4

Difficulty :  Moderate

AACSB:  Reflective Thinking

44) The premier buyer and seller of vintage action figures in the San Francisco Bay area is Vini Vidi Geeky. Since 1996, the owner, Glamdring Elfthrall, has leveraged computer technology to provide a superior level of customer service. In particular, the store’s database system was designed to make detailed information about each individual action figure’s characteristics easily accessible. Price information and condition are also provided for each inventory item. In this database, the price of figures is a(an)

A) entity.

B) attribute.

C) field.

D) record.

Answer:  B

Page Ref: 31

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

45) The premier buyer and seller of vintage action figures in the San Francisco Bay area is Vini Vidi Geeky. Since 1996, the owner, Glamdring Elfthrall, has leveraged computer technology to provide a superior level of customer service. In particular, the store’s database system was designed to make detailed information about each individual action figure’s characteristics easily accessible. Price information and condition are also provided for each inventory item. In this database, the data about an individual figure is a(an)

A) entity.

B) attribute.

C) field.

D) record.

Answer:  D

Page Ref: 32

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

46) The premier buyer and seller of vintage action figures in the San Francisco Bay area is Vini Vidi Geeky. Since 1996, the owner, Glamdring Elfthrall, has leveraged computer technology to provide a superior level of customer service. In particular, the store’s database system was designed to make detailed information about each individual action figure’s characteristics easily accessible. Price information and condition are also provided for each inventory item. In this database, action figures (collectively) are a(an)

A) entity.

B) attribute.

C) field.

D) record.

Answer:  A

Page Ref: 31

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

47) The premier buyer and seller of vintage action figures in the San Francisco Bay area is Vini Vidi Geeky. Since 1996, the owner, Glamdring Elfthrall, has leveraged computer technology to provide a superior level of customer service. In particular, the store’s database system was designed to make detailed information about each individual action figure’s characteristics easily accessible. Price information and condition are also provided for each inventory item. In this database, the data about an individual figure’s price is stored in a(an)

A) entity.

B) attribute.

C) field.

D) record.

Answer:  C

Page Ref: 32

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

48) Hector Sanchez works in the accounting department of a multinational manufacturing company. His job includes updating accounts receivable based on sales orders and remittance advices. His responsibilities are part of the company’s

A) revenue cycle.

B) expenditure cycle.

C) financing cycle.

D) production cycle.

Answer:  A

Page Ref: 27

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Reflective Thinking

49) Hector Sanchez works in the accounting department of a multinational manufacturing company. His job includes updating accounts payable based on purchase orders and checks. His responsibilities are part of the company’s

A) revenue cycle.

B) expenditure cycle.

C) financing cycle.

D) production cycle.

Answer:  B

Page Ref: 27

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Reflective Thinking

50) Many small businesses choose to outsource their payroll activities to firms that specialize in providing payroll services. Dolores Yu operates a payroll processing business in Calabasas, California. When she sends bills out to her clients, her work is part of her firm’s

A) revenue cycle.

B) expenditure cycle.

C) financing cycle.

D) production cycle.

Answer:  A

Page Ref: 27

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Reflective Thinking

51) The coding technique most likely used for sales orders is called a

A) group code.

B) block code.

C) data code.

D) sequence code.

Answer:  D

Page Ref: 28

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

52) Data processing includes all of the following except

A) verifying subsidiary ledger balances.

B) changing customer addresses.

C) removing inventory items no longer offered.

D) adding the name of a new vendor.

Answer:  A

Page Ref: 33

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Reflective Thinking

53) Which of the following is an example of an ERP system?

A) Alexis uses a computerized information system to keep track of all the financial data generated by her bakery. She is considering opening a new bakery on the east side of town.

B) Betty has a system that keeps track of the accounts payable and receivable for her plumbing business. At the end of the year, the system helps her to prepare her taxes in just two hours.

C) Charlie keeps records of all his business records in a shoe box. Each week he enters all of the data into spreadsheets that automatically generate purchase orders, based on predetermined inventory reorder points. Production quotas for the coming week are also automatically generated based on customer orders.

D) Doug is a free-lance photographer. He keeps records of all expenses and revenues on his cell phone and then emails them to himself every month. The files are stored on his personal computer and backed up to CD quarterly.

Answer:  C

Page Ref: 36

Objective:  Learning Objective 5

Difficulty :  Moderate

AACSB:  Reflective Thinking

54) A specialized journal would be most likely to be used to enter

A) sales transactions.

B) monthly depreciation adjustments.

C) annual closing entries.

D) stock issuance transactions.

Answer:  A

Page Ref: 31

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

55) The Cape Fear Rocket Club heads out to the dunes of Kittyhawk, North Carolina every August to pierce the sky with their fiery projectiles. An enterprising seller of t-shirts has devised a series of designs that capture the spirit of the event in silk-screened splendor. His employees can be found on many of the major intersections hawking his wares out of the backs of station wagons and pickup trucks. What is the best way for this business to ensure that sales data entry is efficient and accurate?

A) Well-designed paper forms

B) Source data automation

C) Turnaround documents

D) Sequentially numbered forms

Answer:  D

Page Ref: 27

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Reflective Thinking

56) Which of the following information would most likely be reviewed by management on an exception report?

A) Monthly cash budget

B) Quality control system failures

C) Unit sales by territory and salesperson

D) Income statement

Answer:  B

Page Ref: 34

Objective:  Learning Objective 4

Difficulty :  Moderate

AACSB:  Reflective Thinking

57) All of the following situations would likely be communicated in an exception report except

A) production stoppages.

B) weekly credit and cash sales comparison.

C) low inventory level.

D) expense variances outside acceptable range.

Answer:  B

Page Ref: 34

Objective:  Learning Objective 4

Difficulty :  Easy

AACSB:  Reflective Thinking

58) Changing an employee’s hourly wage rate would be recorded where?

A) Employee master file

B) Employee transaction file

C) Special journal

D) Employee update file

Answer:  A

Page Ref: 32

Objective:  Learning Objective 3

Difficulty :  Difficult

AACSB:  Reflective Thinking

59) Which of the following statements is not correct?

A) The audit trail is intended to verify the validity and accuracy of transaction recording.

B) The audit trail consists of records stored sequentially in an audit file.

C) The audit trail provides the means for locating and examining source documents.

D) The audit trail is created with document numbers and posting references.

Answer:  B

Page Ref: 31

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

60) Data about which of the following facets of a business activity is most likely to be recorded in a transaction file?

A) Business activity

B) Resources affected by the business activity

C) People who participate in the business activity

D) Place the business activity occurs

Answer:  A

Page Ref: 33

Objective:  Learning Objective 3

Difficulty :  Difficult

AACSB:  Reflective Thinking

61) Data about all of the following facets of a business activity are most likely to be recorded in a master file except the

A) business activity.

B) resources affected by the business activity.

C) people who participate in the business activity.

D) place the business activity occurs.

Answer:  A

Page Ref: 32

Objective:  Learning Objective 3

Difficulty :  Difficult

AACSB:  Reflective Thinking

62) Which of the following statements about data processing methods is true?

A) Online real-time processing does not store data in a temporary file.

B) Batch processing cannot be used to update a master file.

C) Control totals are used to verify accurate processing in both batch and online batch processing.

D) Online real-time processing is only possible with source data automation.

Answer:  A

Page Ref: 33

Objective:  Learning Objective 2

Difficulty :  Difficult

AACSB:  Reflective Thinking

63) In an ERP system, the module used to record data about transactions in the revenue cycle is called

A) order to cash.

B) purchase to pay.

C) financial.

D) customer relationship management.

Answer:  A

Page Ref: 37

Objective:  Learning Objective 5

Difficulty :  Moderate

AACSB:  Analytic

64) A delivery of inventory from a vendor, with whom a credit line is already established, would be initially recorded in which type of accounting record and as part of what transaction cycle?

A) purchases journal; expenditure cycle

B) general journal; expenditure cycle

C) general ledger; expenditure cycle

D) cash disbursements journal; production cycle

Answer:  A

Page Ref: 27

Objective:  Learning Objective 1

Difficulty :  Difficult

AACSB:  Reflective Thinking

65) Implementation of an ERP system requires increased focus on all except which of the following controls ?

A) Segregation of duties between custody, authorization, and recording

B) Data entry controls on validity and accuracy

C) Controls over access to data

D) Appropriate disposal of hard copy reports

Answer:  D

Page Ref: 38

Objective:  Learning Objective 5

Difficulty :  Moderate

AACSB:  Analytic

66) Which statement below regarding the AIS and managerial reports is false?

A) The AIS is best utilized for financial data while the management information system is best utilized for operational data.

B) The AIS must be able to provide managers with detailed operational information about the organization’s performance.

C) Both financial and nonfinancial data are required for proper and complete evaluation of organizational performance.

D) Most source documents capture both financial and nonfinancial data about business transactions.

Answer:  A

Page Ref: 34

Objective:  Learning Objective 4

Difficulty :  Moderate

AACSB:  Reflective Thinking

67) What is the purpose of source documents? What controls are embedded in source documents? Give two examples of source documents.

Answer:  The primary purpose of source documents is to record data about business activities. Source documents standardize data collection procedures for an organization and provide better control and accuracy. Source documents are generally pre-numbered, which helps to verify that all transactions have been recorded and there is no missing document; if a document is missing, then which one(s) can be determined. Proper design of source documents ensures which information to collect, preprints standard information such as addresses, and provides directions for completing the form. Examples include: invoices, timecards, sales orders, and purchase orders.

Page Ref: 27-28

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Reflective Thinking

68) Describe an audit trail.

Answer:  An audit trail provides a means to check the accuracy and validity of postings to the ledger. The posting references and document numbers help provide the audit trail. An audit trail exists when company transactions can be traced through the AIS from where it originated to where they end up on the financial statements

Page Ref: 31

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

69) Explain how data is organized and stored in an AIS.

Answer:  The smallest unit of data is known as a data value. A data value is physically stored in a space called a field. Any number of fields can be grouped together to form a record. Related records are grouped together to form a file. Files are then combined to form a database.

Page Ref: 32

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

70) Describe the basic cycles and business activities for a typical merchandising company.

Answer:  Revenue cycle  deliver inventory to customers and collect cash. Expenditure cycle  receive goods and services from vendors and pay cash. Human resources cycle  track hours worked by employees and record withholding data.

Page Ref: 27

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

71) Describe guidelines to follow for a well-designed coding system.

Answer:  First, the code should be consistent with its intended use. Second, the code should allow for growth in the number of items to be coded. The coding system should be as simple as possible. The coding system should be consistent with the company’s organizational structure and it should be consistent across the different divisions of an organization.

Page Ref: 29

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

72) Describe the relationship between the general and subsidiary ledgers.

Answer:  The general ledger contains summary-level information about every asset, liability, equity, revenue, and expense account in an organization. The balances in general ledger accounts form the starting point for preparation of financial statements and various other financial reports. A subsidiary ledger account provides support for any general ledger account for which individual subaccounts (for example, accounts receivable, accounts payable, inventory, and fixed assets) are required. The subsidiary ledger records and maintains the detail-level information by having a separate record for each customer, vendor, inventory item, or fixed asset. The sum of the subsidiary ledger balances should equal the balance in the general ledger account. A general ledger account that corresponds to a subsidiary ledger account is known as a control account.

Page Ref: 28

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

73) Describe four advantages and four disadvantages of implementing an ERP system at a multinational corporation.

Answer: 

Advantages

Integrating information breaks down barriers between departments and streamlines the flow of information.

Data input is captured or keyed only once.

Management gains greater visibility into every area of the enterprise and has improved monitoring capabilities.

Better access control is established by consolidating multiple permissions and security models into a single data access structure.

Standardization of procedures and reports across business units.

Customer service improves as employees can quickly access data.

Increased productivity of employees.

Disadvantages

ERP systems are very costly.

Implementation is time consuming.

Changes to business processes are sometimes required, in order to minimize the customization needed.

Complexity of the system.

Employees may be resistant to implement and use an ERP system and change business processes.

Page Ref: 37-38

Objective:  Learning Objective 5

Difficulty :  Easy

AACSB:  Analytic

74) Describe the methods used to collect data about business activities. Describe design and control considerations for each of the data collection methods.

Answer:  Data about business activities can be collected with source documents, either on paper or electronic, turnaround documents, and source data automation.

Source documents define what data to collect about an activity, group logically related data close together, provide instructions on how to complete the document, include fields for approvals, and use preprinted standard data. Paper documents should be sequentially prenumbered to allow verification that all documents have been recorded. Electronic source documents should also utilize pull-down menus, drop-down boxes, default values, preformatting, auto sequential numbering, and prompting for complete data entry.

Turnaround documents often begin as output documents that are then sent to external users for further completion. Turnaround documents should utilize most of the same design and control considerations as source documents, but should include data in machine-readable form, such as bar codes or optical character recognition.

Source data automation utilizes technology to capture data in machine-readable form at the time and place the business activity occurs. Source data automation technology includes point-of-sale terminals, bar codes, RFID tags, and electronic data interchange. An especially important control consideration for source data automation is a way to indicate authorization of the activity.

Page Ref: 27

Objective:  Learning Objective 2

Difficulty :  Difficult

AACSB:  Reflective Thinking

Chapter 3  

1) Graphical representations of information are often supplemented by

A) product specifications.

B) narrative descriptions.

C) logic charts.

D) oral descriptions from management.

Answer:  B

Page Ref: 49

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

2) The correct label for Shape 1 in the flowchart below is

A) Purchase Order 2

B) Purchase Requisition 1

C) Accounts Payable Trial Balance

D) 2

Answer:  A

Page Ref: 55-60

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

3) The correct label for Shape 2 in the flowchart below is

A) 1

B) Purchase Requisition 1

C) Receiving Report 1

D) 2

Answer:  A

Page Ref: 55-60

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

4) The correct label for Shape 3 in the flowchart below is

A) Purchase Order 4

B) Purchase Requisition 1

C) Vendor

D) 4

Answer:  B

Page Ref: 55-60

Objective:  Learning Objective 2

Difficulty :  Difficult

AACSB:  Analytic

5) The correct shape for the triangle labeled “Supplier” in the flowchart below is

A) magnetic disk

B) terminal

C) manual process

D) off-page connector

Answer:  B

Page Ref: 57

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Analytic

6) When preparing a document flowchart, the names of organizational departments or job functions should appear in the

A) column headings.

B) right-hand margin.

C) written narrative accompanying the flowchart.

D) title of the flowchart.

Answer:  A

Page Ref: 60

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

7) All of the following are guidelines for preparing data flow diagrams except

A) show the most detail in the highest-level DFD.

B) include all storage files, even if they are only temporary.

C) uniquely name all data flows.

D) sequentially number process bubbles.

Answer:  A

Page Ref: 55

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Analytic

8) Flowchart symbols

A) are divided into four categories.

B) are unique to the organization creating the flowchart.

C) are normally drawn using a flowcharting template.

D) eliminate the need for narrative descriptions or explanations.

Answer:  A

Page Ref: 56

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

9) The Sarbanes-Oxley Act requires independent auditors to

A) create flowcharts using specialized software.

B) establish and maintain adequate controls in the client’s information system.

C) understand a client’s system of internal controls.

D) prepare and understand all types of system documentation.

Answer:  C

Page Ref: 50

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Analytic

10) The passage of the Sarbanes Oxley Act

A) made documentation skills even more important.

B) requires public companies to prepare an annual internal control report.

C) mandates that auditors must be able to prepare, evaluate and read documentation tools such as flowcharts.

D) all of the above

Answer:  D

Page Ref: 50

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

11) Which of the following is not a true statement?

A) Documentation tools save an organization both time and money.

B) Documentation tools are used extensively in the systems development process.

C) Data flow diagrams and flowcharts are the two most frequently used systems development documentation tools.

D) Data flow diagrams and flowcharts are difficult to prepare and revise using software packages.

Answer:  D

Page Ref: 50

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

12) A data flow diagram

A) is a graphical description of the source and destination of data that shows how data flow within an organization.

B) is a graphical description of the flow of documents and information between departments or areas of responsibility.

C) is a graphical description of the relationship among the input, processing, and output in an information system.

D) is a graphical description of the sequence of logical operations that a computer performs as it executes a program.

Answer:  A

Page Ref: 50

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

13) In a DFD, a “data sink” is also known as a

A) data store.

B) transformation process.

C) data flow.

D) data destination.

Answer:  D

Page Ref: 50

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

14) In preparing a DFD, when data are transformed through a process, the symbol used should be

A) a circle.

B) an arrow.

C) a square.

D) two horizontal lines.

Answer:  A

Page Ref: 50-51

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

15) In general, a data destination will be shown by

A) an arrow pointing away.

B) an arrow pointing in.

C) arrows pointing both ways.

D) no arrows, only two horizontal lines.

Answer:  B

Page Ref: 51

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

16) In a data flow diagram of the customer payment process, “update receivables” will appear above or in

A) a square.

B) a circle.

C) two horizontal lines.

D) none of the above

Answer:  B

Page Ref: 51

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

17) In a data flow diagram of the customer payment process, “Customer” will appear above or in

A) a square.

B) a circle.

C) two horizontal lines.

D) none of the above

Answer:  A

Page Ref: 51

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

18) In a data flow diagram of the customer payment process, “Customer payment” will appear above or in

A) a square.

B) a circle.

C) two horizontal lines.

D) an arrow.

Answer:  D

Page Ref: 51

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

19) Most processes on a DFD can be identified by

A) data in-flows only.

B) data out-flows only.

C) data flows both into or out of a process.

D) always being followed by a data store.

Answer:  C

Page Ref: 55

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

20) More than one arrow is needed between symbols on a DFD if

A) data elements always flow together.

B) data elements flow at different times.

C) data elements flow to different locations.

D) there is no guideline on use of single or multiple arrows.

Answer:  B

Page Ref: 55

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

21) A DFD created at the highest-level or summary view is referred to as a

A) process diagram.

B) overview diagram.

C) content diagram.

D) context diagram.

Answer:  D

Page Ref: 52

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

22) In a payroll processing DFD, the “prepare reports” activity will be represented by ________, the “employee payroll file” will be represented by ________, and the “management” will be represented by ________.

A) a circle; two horizontal lines; a square

B) a circle; two horizontal lines; two horizontal lines

C) a rectangle; a square; a circle

D) a square; two horizontal lines; a circle

Answer:  A

Page Ref: 54

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Analytic

23) Which is a true statement regarding the use of the manual processing symbol in a flowchart?

A) If a document is moved from one column to another, show the document only in the last column.

B) Each manual processing symbol should have an input and an output.

C) Do not connect two documents when moving from one column to another.

D) Use a manual processing symbol to indicate a document being filed.

Answer:  B

Page Ref: 60

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

24) Which is a true statement regarding a document flowchart?

A) A document flowchart illustrates the sequence of logical operations performed by a computer.

B) A document flowchart is particularly useful in analyzing the adequacy of internal control procedures.

C) A document flowchart should ignore control processes and actions.

D) A document flowchart is not normally used in the systems design process.

Answer:  B

Page Ref: 57

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

Use the chart below to answer the following questions regarding flow chart symbols.

25) Which symbol would be used in a flowchart to represent a computer process?

A) #1

B) #2

C) #5

D) #15

Answer:  C

Page Ref: 56-57

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

26) Which symbol would be used in a flowchart to represent a decision?

A) #10

B) #16

C) #9

D) #6

Answer:  A

Page Ref: 56-57

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

27) Which symbol would be used in a flowchart to represent an invoice sent to a customer?

A) #2

B) #6

C) #1

D) #15

Answer:  C

Page Ref: 56-57

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

28) Which symbol would be used in a flowchart to represent a general ledger?

A) #2

B) #1

C) #3

D) #5

Answer:  A

Page Ref: 56-57

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

29) Which symbol would be used in a flowchart to represent a manual process?

A) #5

B) #6

C) #10

D) #11

Answer:  B

Page Ref: 56-57

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

30) Which symbol would be used in a flowchart to represent a connection to another part of the flowchart on the same page?

A) #4

B) #13

C) #14

D) #15

Answer:  C

Page Ref: 56-57

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

31) Which symbol would be used in a flowchart to represent a connection to another part of the flowchart on a different page?

A) #4

B) #13

C) #14

D) #15

Answer:  D

Page Ref: 56-57

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

32) Which symbol would be used in a flowchart to represent a file of paper documents?

A) #7

B) #8

C) #9

D) #15

Answer:  C

Page Ref: 56-57

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

33) Which symbol would be used in a flowchart to represent a general ledger master file kept on magnetic disk?

A) #2

B) #5

C) #7

D) #8

Answer:  C

Page Ref: 56-57

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

34) Which symbol would be used in a flowchart to represent employee time cards sent by department managers to the payroll department?

A) #1

B) #4

C) #11

D) #16

Answer:  A

Page Ref: 56-57

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

35) Which symbol would be used in a flowchart to represent the display of a report on a computer screen?

A) #1

B) #2

C) #3

D) #11

Answer:  C

Page Ref: 56-57

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

36) Which symbol would be used in a flowchart to represent the addition of information about a step represented in another symbol on the flowchart?

A) #1

B) #5

C) #11

D) #15

Answer:  C

Page Ref: 56-57

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

37) Which symbol would be used in a flowchart to represent a payroll master file kept on magnetic tape?

A) #4

B) #7

C) #8

D) #9

Answer:  C

Page Ref: 56-57

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

38) Which symbol would be used in a flowchart to represent a beginning, an ending, or a connection to another procedure?

A) #9

B) #14

C) #15

D) #16

Answer:  D

Page Ref: 56-57

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Analytic

39) Which symbol would be used in a flowchart to represent a flow of data or documents?

A) #12

B) #13

C) #14

D) #15

Answer:  A

Page Ref: 56-57

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

40) Which symbol would be used in a flowchart to represent a communication link?

A) #12

B) #13

C) #14

D) #15

Answer:  B

Page Ref: 56-57

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

41) In a document flowchart of a manual payroll processing system, “update employee file” will be shown by a(n) ________ symbol, and “prepare payroll check” will be shown by a(n) ________ symbol.

A) input; output

B) input; manual operation

C) manual operation; output

D) manual operation; manual operation

Answer:  D

Page Ref: 58

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

42) A flowchart that depicts the relationships among the input, processing, and output of an AIS is

A) an internal control flowchart.

B) a document flowchart.

C) a system flowchart.

D) a program flowchart.

Answer:  C

Page Ref: 60

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

43) In a program flowchart, branching to alternative paths is represented by

A) a terminal.

B) data/information flow.

C) computer operation.

D) decision diamond.

Answer:  D

Page Ref: 57

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

44) The Union Soup Kitchen is a non-profit organization that collects, stores, prepares and provides food to the homeless in Erie, Pennsylvania. Donations of food are recorded in a database and a receipt is provided to the donor. When food is used, the database is updated so that it always reflects the amounts and types of food that are available. In a data flow diagram, which type of symbol would be used to represent donors?

A)

B)

C)

D)

Answer:  A

Page Ref: 50

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

45) The Union Soup Kitchen is a non-profit organization that collects, stores, prepares and provides food to the homeless in Erie, Pennsylvania. Donations of food are recorded in a database and a receipt is provided to the donor. When food is used, the database is updated so that it always reflects the amounts and types of food that are available. In a data flow diagram, which type of symbol would be used to represent the processing of donations?

A)

B)

C)

D)

Answer:  B

Page Ref: 50

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

46) The Union Soup Kitchen is a non-profit organization that collects, stores, prepares and provides food to the homeless in Erie, Pennsylvania. Donations of food are recorded in a database and a receipt is provided to the donor. When food is used, the database is updated so that it always reflects the amounts and types of food that are available. In a data flow diagram, which type of symbol would be used to represent the storage location of data in the system?

A)

B)

C)

D)

Answer:  D

Page Ref: 50

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

47) The Union Soup Kitchen is a non-profit organization that collects, stores, prepares and provides food to the homeless in Erie, Pennsylvania. Donations of food are recorded in a database and a receipt is provided to the donor. When food is used, the database is updated so that it always reflects the amounts and types of food that are available. In a data flow diagram, which type of symbol would be used to represent the process of updating inventory records in the system?

A)

B)

C)

D)

Answer:  B

Page Ref: 50

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

48) The Union Soup Kitchen is a non-profit organization that collects, stores, prepares and provides food to the homeless in Erie, Pennsylvania. Donations of food are recorded in a database and a receipt is provided to the donor. When food is used, the database is updated so that it always reflects the amounts and types of food that are available. In a data flow diagram, which type of symbol would be used to represent the flow of data from the donor into the system?

A)

B)

C)

D)

Answer:  C

Page Ref: 50

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

49) Chuck and Jill Scruggs travel in their motor home six months of the year and buy unique artifacts. Within hours after the Scruggs make a purchase, they have photographed it, written a description of it, and posted it for sale on eBay with a reservation price. Anything that does not sell is shipped back to Austin, Texas, for display in The House of Curiosities, a retail business that the Scruggs operate during the balance of the year. Which symbol should be used to represent eBay in a context diagram of this process?

A)

B)

C)

D)

Answer:  A

Page Ref: 50

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Analytic

50) Chuck and Jill Scruggs travel in their motor home six months of the year and buy unique artifacts. Within hours after the Scruggs make a purchase, they have photographed it, written a description of it, and posted it for sale on eBay with a reservation price. Anything that does not sell is shipped back to Austin, Texas, for display in The House of Curiosities, a retail business that the Scruggs operate during the balance of the year. Which symbol should be used to represent the preparation of data for submission to eBay in a context diagram of this process?

A)

B)

C)

D)

Answer:  B

Page Ref: 50

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Analytic

51) Chuck and Jill Scruggs travel in their motor home six months of the year and buy unique artifacts. Within hours after the Scruggs make a purchase, they have photographed it, written a description of it, and posted it for sale on eBay with a reservation price. Anything that does not sell within a week is shipped back to Austin, Texas, for display in The House of Curiosities, a retail business that the Scruggs operate during the balance of the year. Which symbol should be used to represent the transfer of data to eBay in a context diagram of this process?

A)

B)

C)

D)

Answer:  C

Page Ref: 50

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

52) Chuck and Jill Scruggs travel in their motor home six months of the year and buy unique artifacts. Within hours after the Scruggs make a purchase, they have photographed it, written a description of it, and posted it for sale on eBay with a reservation price. Anything that does not sell is shipped back to Austin, Texas, for display in The House of Curiosities, a retail business that the Scruggs operate during the balance of the year. Which symbol should be used to represent the remote server that is used to store data while the Scruggs are traveling?

A)

B)

C)

D)

Answer:  D

Page Ref: 50

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

53) Chas Mulligan has been hired by Yardley Security as an assistant to the internal auditor. He has been asked to thoroughly document the existing accounting information system in preparation for making recommendations for improvements to internal controls. He decides to begin with a description of the information stored in paper records, their sources, and their destinations. The documentation tool that he should employ for this purpose is a

A) data flow diagram.

B) document flowchart.

C) system flowchart.

D) program flowchart.

Answer:  B

Page Ref: 57

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Reflective Thinking

54) Chas Mulligan has been hired by Yardley Security as an assistant to the internal auditor. He has been asked to document the existing accounting information system, and focus on the activities and flow of data between activities. He decides to begin with a summary description of the sources and uses of data in the organization and how they are processed by the system. The documentation tool that he should employ for this purpose is a

A) data flow diagram.

B) document flowchart.

C) system flowchart.

D) program flowchart.

Answer:  A

Page Ref: 50

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Reflective Thinking

55) Chas Mulligan has been hired by Yardley Security as an assistant to the internal auditor. He has been asked to thoroughly document the existing accounting information system in preparation for making recommendations for improvements. He decides to begin by meeting with the information technology staff in order to develop an understanding of the computer programs used by the system. The documentation tool that he should employ for this purpose is a

A) data flow diagram.

B) document flowchart.

C) system flowchart.

D) program flowchart.

Answer:  D

Page Ref: 62

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Reflective Thinking

56) Chas Mulligan has been hired by Yardley Security as an assistant to the internal auditor. He has been asked to thoroughly document the existing accounting information system in preparation for making recommendations for improvements. He decides to begin by meeting with the information technology staff in order to develop an understanding of the overall operation of the AIS, including data entry, storage, and output. The documentation tool that he should employ for this purpose is a

A) data flow diagram.

B) document flowchart.

C) system flowchart.

D) program flowchart.

Answer:  C

Page Ref: 60

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Reflective Thinking

57) When a sale is made, data is captured by a cash register and stored on a floppy disk for later uploading to the accounting system. Which one of the following diagrams represents this activity?

A)

B)

C)

D)

Answer:  A

Page Ref: 56

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Reflective Thinking

58) A materials requisition order document is prepared from the inventory file and the materials file, both of which are stored on disk. Which one of the following diagrams represents this activity?

A)

B)

C)

D)

Answer:  D

Page Ref: 56-57

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Reflective Thinking

59) A customer’s check is returned for insufficient funds and the accounts receivable file, stored on magnetic disk, is updated. Which one of the following diagrams represents this activity?

A)

B)

C)

D)

Answer:  C

Page Ref: 56-57

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Reflective Thinking

60) A business simulation game that is used by colleges and universities all over the world has students submit decisions over the Internet. Decisions are stored online, processed on the server, and then the results are stored online. They are then downloaded by students in preparation for the next round. Which one of the following diagrams represents this activity?

A)

B)

C)

D)

Answer:  C

Page Ref: 56-57

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Reflective Thinking

61) A report is generated from data stored on magnetic disk. Which one of the following diagrams represents this activity?

A)

B)

C)

D)

Answer:  C

Page Ref: 56-57

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Reflective Thinking

62) An employee receives a paycheck prepared in the payroll process. Which one of the following diagrams represents this activity?

A)

B)

C)

D)

Answer:  B

Page Ref: 56-57

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Reflective Thinking

63) A student manually prepares a homework assignment and then turns it in to her teacher. Which one of the following diagrams represents this activity?

A)

B)

C)

D)

Answer:  A

Page Ref: 56-57

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Reflective Thinking

64) A well-planned and drawn level 0 data flow diagram for the expenditure cycle would show which of the following processes?

A) 0.1 Order Goods; 1.1 Receive and Store Goods; 2.1 Pay for Goods

B) 0.1 Order Goods; 0.2 Receive and Store Goods; 0.3 Pay for Goods

C) 1.0 Order Goods; 2.0 Receive and Store Goods; 3.0 Pay for Goods

D) 1.0 Order Goods; 1.1 Receive and Store Goods; 1.2 Pay for Goods

Answer:  C

Page Ref: 52-53

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Reflective Thinking

65) A well-planned and drawn context data flow diagram will include how many processes?

A) One

B) Between 5 and 7

C) Between 2 and 7, but no more than 7

D) As many as are needed to accurately depict the process being documented

Answer:  A

Page Ref: 52

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Analytic

66) Which of the following is not true about program flowcharts?

A) Program flowcharts are a high-level overview of all business processes.

B) Program flowcharts document the processing logic of computer programs.

C) A program flowchart will exist for every computer process symbol on a system flowchart.

D) Program flowcharts increase computer programmer productivity.

Answer:  A

Page Ref: 62

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Reflective Thinking

67) Data flow diagrams depict

A) processes, but not who is performing the processes.

B) processes, but not the data that flows between processes.

C) who is performing processes, but not how they perform the process.

D) who is performing processes, but not the data that flows between processes.

Answer:  A

Page Ref: 50

Objective:  Learning Objective 1

Difficulty :  Difficult

AACSB:  Reflective Thinking

68) Which is the correct label for the blank transformation process circle in the data flow diagram below?

A) 1.2 Check Credit

B) 1.2 Enter Order in Sales Journal

C) 1.2 Does Customer Have Credit?

D) 1.2 Salesperson Approves

Answer:  A

Page Ref: 52

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Analytic

69) In the data flow diagram below, inventory is a

A) data store.

B) data source.

C) data flow.

D) data source and destination.

Answer:  A

Page Ref: 52

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Analytic

70) Discuss the ways in which information professionals interact with documentation tools and the various levels of understanding necessary.

Answer:  At a minimum, a professional should be able to read documentation. A professional may also be called upon to evaluate internal control system documentation in order to identify control strengths and weaknesses or recommend improvements. A professional may be engaged to prepare documentation, which requires the greatest amount of skill and understanding of a particular system.

Page Ref: 49

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Analytic

71) Explain two reasons why it is important to have a working knowledge of DFDs and flowcharting.

Answer:  First, SOX requires auditors to evaluate internal control systems. Data flow diagrams and flowcharts are the two most frequently used development and documentation tools used in practice. Second, since systems development is extremely complex, DFDs and flowcharts are tools that are used to create order from chaos and complexity. Third, documentation tools and concepts are covered on the CPA exam.

Page Ref: 50

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Analytic

72) What does the Sarbanes-Oxley Act require that is relevant to documentation tools?

Answer:  The Sarbanes-Oxley Act requires that independent auditors understand the automated and manual procedures an entity uses. One of the best ways to gain this understanding is to use the flowcharts to document the internal control system, as weaknesses and strengths are more easily spotted from such graphic portrayals.

Page Ref: 50

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

73) Describe a situation in which data flow should be shown with two data flow lines instead of one.

Answer:  A data flow may consist of one or more pieces of datum. The determining factor is whether the data elements always flow together at the same time. For example, “customer payment” have both payment and remittance data. Since these elements always flow together, only one data flow line is required. However, data flows between the customer and the payment processes have customer inquiries and cash receipts; these data items do not always flow together at the same time. In such a case, two data flow lines will be shown.

Page Ref: 51

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Reflective Thinking

74) Describe the different levels of DFDs.

Answer:  The highest-level or summary view DFD, which shows major inputs/outputs and a single process is called a context diagram. The DFD itself shows inputs, major processes, and outputs; each process in the DFD can be “exploded” or shown in greater level of detail with the sub-processes and related data flows.

Page Ref: 52

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Analytic

75) Describe a system flowchart. Describe a program flowchart. How are the two interrelated?

Answer:  Systems flowcharts depict the relationships among the input, processing, and output of an AIS. The program flowchart illustrates the sequence of logical operations performed by a computer in executing a program. System flowcharts identify processing areas but do not show how the processing is done. The detailed logic used by the computer to perform the processing is shown on a separate program flowchart.

Page Ref: 60-62

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Reflective Thinking

76) How is a DFD different from a flowchart?

Answer:  The purpose of a DFD is to diagram the origins, flow, transformation, storage, and destination of data. The purpose a flowchart is to present a graphical description of the flow of documents, relationships among input, processing, and output, or the sequence of logical operations in an information system or program. A DFD is limited to basic symbols and lines, and focuses on the flow and use of data. A flowchart will generally be more complex, and more focused on the managerial, AIS, or IS aspects of the organization.

Page Ref: 50,56

Objective:  Learning Objective 1

Difficulty :  Difficult

AACSB:  Reflective Thinking

77) Explain the relevance of the Sarbanes Oxley Act to the documentation tools presented in this chapter.

Answer:  The Sarbanes Oxley Act of 2002 requires executives of public companies to document and evaluate internal controls. External auditors must evaluate management’s assessment of internal control and attest to its accuracy. Therefore, company executives and the auditors must document and test the internal controls  documentation tools, such as flowcharts, are used to do this.

Page Ref: 50

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

78) Discuss the idea of a data flow.

Answer:  A data flow is a graphic representation of the flow of data between processes, data stores, and data sources and destinations. A data flow is really a form of communication. When the analyst draws a curved or straight line with an arrow at one end, what is represented is a form of communication among the other elements of the data flow process. Consider for example a data source being depicted by a box. The box represents a data source. Data then is sent from the source to a circle, which represents a transformation process. The source of data sends the flow to the transformation process, which will process the data and somehow use the data or turn it into useful information. Note that data flows can represent one or more pieces of datum. Because data flows may have more than one data element, the analyst must determine whether to show one or more lines. Good DFDs and data flow lines in such diagrams eliminate the need for users and analysts to “infer” what type of information is flowing.

Page Ref: 51

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Analytic

79) What is the value of using a context diagram when working with DFDs?

Answer:  In order to create a useful DFD, the analyst must determine system boundarieswhat is to be included or excluded from the system. A context diagram will help to achieve this goal, since it is a good way to depict the boundaries of the system. The analyst first creates a context diagram by placing a circle in the middle of the diagram. The circle represents the system under consideration. On either side of the circle, boxes are created which represent outside entities the system interacts with directly. Data flow lines are drawn to show the direction of the flow of data. After this pictorial representation has been completed, the analyst can then better assess the boundaries of the system and amount of interaction between the system and outside entities.

Page Ref: 52

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Reflective Thinking

80) Identify five important guidelines for drawing a DFD. Select one from your list and describe why it could be the most important one to consider when preparing a DFD. Support your choice with an example.

Answer:  Understand the system. Ignore certain aspects of the system (such as control processes and control actions). Determine system boundaries. Develop a context diagram. Identify data flows. Group data flows. Identify transformation processes. Group transformation processes. Identify all files or data stores. Identify all data sources and destinations. All DFD elements are named. Subdivide the DFD. Give each process a sequential number. Repeat the process. Prepare a final copy. (Student answers will vary depending on the items chosen and the quality of their argument. The text provides various items that could be used to answer this question.)

Page Ref: 55

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Reflective Thinking

81) Identify five important guidelines for drawing a flowchart. Select one from your list and describe why it could be the most important one to consider when preparing a flowchart. Support your choice with an example.

Answer:  Use interviews, questionnaires, or narrative descriptions to understand the system before flowcharting it. Identify the different entities to be flowcharted such as departments, job functions, or external parties. Also identify documents and information flows along with the activities or processes performed on the data. Organize the flowchart using columns when several entities are involved in the process. Focus on the normal operations and include all relevant procedures and processes. Flowcharts should flow from top to bottom and from left to right. The origin and disposition of documents should be clearly identified by a clear beginning and end in the flowcharts. Use standard flowchart symbols. Multiple documents should be identified by numbers shown in the top right-hand corner of the document symbol. Documents do not directly connect with each other, except when moving from one column to another. Use on-page and off-page connectors to organize flowcharts. Use arrowheads to direct the flow of documents. Clearly label the pages, such as 1 of 3, 2 of 3, and 3 of 3. Documents or reports should be first shown in the column in which they originate and then moved to other columns. Use computer processing symbols to show movement of data in and out of the computer system. Filing operations can be directly shown with one line, no manual processing symbol required. Flowcharting is an iterative process. The first attempt should be a rough draft that is refined with each successive pass. Do not clutter flowcharts; redesign the flowchart as necessary. Review the flowchart for accuracy. On the final copy of the flowchart, the name of the flowchart, date, and the preparer’s name should be shown. (Student answers will vary depending on the items chosen and the quality of their argument. The text provides various items that could be used to answer this question.)

Page Ref: 60

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Analytic

82) Following is a context diagram for a current Payroll Processing System. a) Identify the data sources and destinations, data flows, and transformation process marked by question marks. b) What would you need to do to explode this diagram?

Answer:  1 – Human resources, 2 – Time cards, 3 – Payroll processing system, 4 – Employee paychecks or pay-stubs, 5- Payroll report, 6 – Government agencies, 7- Banks. To explode this diagram, additional information is needed to identify detailed procedures within the payroll processing activity as well as additional inputs and outputs. It would be useful to obtain a comprehensive narrative of the payroll processing procedures for review and identification of these items. If there is no narrative available, interviews are another source of information.

Page Ref: 52

Objective:  Learning Objective 1

Difficulty :  Difficult

AACSB:  Reflective Thinking

83) Identify the mistake(s) in each flowchart segment.

Answer: 

a. Figure a – the sort symbol should be a manual operation symbol.

b. Figure b – the file update symbol should be a computer operation symbol, and the arrow from transaction file should flow into file update.

c. Figure c – the arrows should point from left to right and a computer operation symbol is needed between the source data and the master file symbols.

d. Figure d – the symbol for Endorsed should be a manual operation symbol, and endorsed checks are sent to the bank, so the file symbol should be replaced with a terminal symbol.

Page Ref: 56-57, 60

Objective:  Learning Objective 2

Difficulty :  Difficult

AACSB:  Reflective Thinking

Chapter 4  

1) Using a file-oriented approach to data and information, data is maintained in

A) a centralized database.

B) many interconnected files.

C) many separate files.

D) a decentralized database.

Answer:  C

Page Ref: 88

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

2) In a well-structured relational database,

A) every table must be related to at least one other table.

B) every table must be related to all other tables.

C) one table must be related to at least one other table.

D) one table must be related to all other tables.

Answer:  A

Page Ref: 96-98

Objective:  Learning Objective 4

Difficulty :  Moderate

AACSB:  Reflective Thinking

3) File-oriented approaches create problems for organizations because of

A) multiple transaction files.

B) a lack of sophisticated file maintenance software.

C) multiple users.

D) multiple master files.

Answer:  D

Page Ref: 88

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Analytic

4) Which statement is true regarding file systems?

A) Transaction files are similar to ledgers in a manual AIS.

B) Multiple master files create problems with data consistency.

C) Transaction files are permanent.

D) Individual records are never deleted in a master file.

Answer:  B

Page Ref: 88

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

5) The ________ acts as an interface between the database and the various application programs.

A) data warehouse

B) database administrator

C) database management system

D) database system

Answer:  C

Page Ref: 88

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

6) The combination of the database, the DBMS, and the application programs that access the database through the DBMS is referred to as the

A) data warehouse.

B) database administrator.

C) database system.

D) database manager.

Answer:  C

Page Ref: 88

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

7) The person responsible for the database is the

A) data coordinator.

B) database administrator.

C) database manager.

D) database master.

Answer:  B

Page Ref: 88

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

8) All of the following are benefits of the database approach except:

A) Data integration and sharing

B) Decentralized management of data

C) Minimal data redundancy

D) Cross-functional analysis and reporting

Answer:  B

Page Ref: 89

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

9) The physical view of a database system refers to

A) how a user or programmer conceptually organizes and understands the data.

B) how the DBMS accesses data for a certain application program.

C) how and where the data are physically arranged and stored.

D) how master files store data values used by more than one application program.

Answer:  C

Page Ref: 90

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Analytic

10) The ________ handles the link between the way data are physically stored and each user’s logical view of that data.

A) data warehouse

B) data dictionary

C) database management (DBMS) software

D) schema

Answer:  C

Page Ref: 90

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

11) The logical structure of a database is described by the

A) data dictionary.

B) schema.

C) database management system.

D) internal level.

Answer:  B

Page Ref: 90

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

12) The schema that provides an organization-wide view of the entire database is known as the

A) external-level schema.

B) internal-level schema.

C) conceptual-level schema.

D) logical view of the database.

Answer:  C

Page Ref: 90

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

13) A set of individual user views of the database is called the

A) conceptual-level schema.

B) internal-level schema.

C) external-level schema.

D) meta-schema.

Answer:  C

Page Ref: 90

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

14) A low-level view of the database that describes how the data are actually stored and accessed is the

A) conceptual-level schema.

B) subschema.

C) internal-level schema.

D) external-level schema.

Answer:  C

Page Ref: 90

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

15) Record layouts, definitions, addresses, and indexes will be stored at the ________ level schema.

A) external

B) conceptual

C) internal

D) meta

Answer:  C

Page Ref: 90

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

16) The ________ contains information about the structure of the database.

A) data definition language

B) data dictionary

C) data warehouse

D) database management system

Answer:  B

Page Ref: 92

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

17) Which of the following would not be found in a data dictionary entry for a data item?

A) records containing a specific data item

B) physical location of the data

C) source of the data item

D) field type

Answer:  B

Page Ref: 93

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Analytic

18) The data dictionary usually is maintained

A) automatically by the DBMS.

B) by the database administrator.

C) by the database programmers.

D) by top management.

Answer:  A

Page Ref: 92

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

19) Reports produced using the data dictionary could include all of the following except a list of

A) programs where a data item is used.

B) synonyms for the data items in a particular file.

C) outputs where a data element is used.

D) the schemas included in a database.

Answer:  D

Page Ref: 92

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Analytic

20) Which statement below concerning the database management system (DBMS) is false?

A) The DBMS automatically creates application software for users, based on data dictionary parameters.

B) The DBMS automatically maintains the data dictionary.

C) Users’ requests for information are transmitted to the DBMS through application software.

D) The DBMS uses special languages to perform specific functions.

Answer:  A

Page Ref: 92

Objective:  Learning Objective 3

Difficulty :  Difficult

AACSB:  Analytic

21) Which would not generally be considered a data dictionary output report?

A) A list of cash balances in the organization’s bank accounts

B) A list of all programs in which a data element is used

C) A list of all synonyms for the data elements in a particular file

D) A list of all data elements used by a particular user

Answer:  A

Page Ref: 92

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

22) Creating an empty table in a relational database requires use of the ________, and populating that table requires the use of ________.

A) DDL; DML

B) DQL; SQL

C) DDL; DQL

D) DML; DDA

Answer:  A

Page Ref: 92

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Analytic

23) When the human resources manager wants to gather data about vacation and personal day usage by employees and by departments, the manager would use which language?

A) Data Query Language

B) Data Manipulation Language

C) Data Report Language

D) Data Definition Language

Answer:  A

Page Ref: 92

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Analytic

24) If a national sales tax were implemented, which language would be used to add a new field in the sales table to track the sales tax due?

A) Data Definition Language

B) Data Manipulation Language

C) Data Query Language

D) Data Update Language

Answer:  A

Page Ref: 92

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Analytic

25) The feature in many database systems that simplifies the creation of reports by allowing users to specify the data elements desired and the format of the output. is named the

A) report writer.

B) report generator.

C) report creator.

D) report printer.

Answer:  A

Page Ref: 92

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

26) The abstract representation of the contents of a database is called the

A) logical data model.

B) data dictionary.

C) physical view.

D) schema.

Answer:  A

Page Ref: 90

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

27) The problem of changes (or updates) to data values in a database being incorrectly recorded is known as

A) an update anomaly.

B) an insert anomaly.

C) a delete anomaly.

D) a memory anomaly.

Answer:  A

Page Ref: 94

Objective:  Learning Objective 4

Difficulty :  Easy

AACSB:  Analytic

28) The potential inconsistency that could occur when there are multiple occurrences of a specific data item in a database is called the

A) update anomaly.

B) insert anomaly.

C) inconsistency anomaly.

D) delete anomaly.

Answer:  A

Page Ref: 94

Objective:  Learning Objective 4

Difficulty :  Easy

AACSB:  Analytic

29) Inability to add new data to a database without violating the basic integrity of the database is referred to as the

A) update anomaly.

B) insert anomaly.

C) integrity anomaly.

D) delete anomaly.

Answer:  B

Page Ref: 94

Objective:  Learning Objective 4

Difficulty :  Easy

AACSB:  Analytic

30) A relational database in which customer data is not maintained independently of sales invoice data will most likely result in

A) an update anomaly.

B) an insert anomaly.

C) a delete anomaly.

D) an integrity anomaly.

Answer:  B

Page Ref: 94

Objective:  Learning Objective 4

Difficulty :  Moderate

AACSB:  Reflective Thinking

31) The problem of losing desired information from a database when an unwanted record is purged from the database is referred to as the ________ anomaly.

A) purge

B) erase

C) delete

D) integrity

Answer:  C

Page Ref: 94

Objective:  Learning Objective 4

Difficulty :  Easy

AACSB:  Analytic

32) The delete anomaly

A) may result in unintentional loss of important data.

B) is usually easily detected by users.

C) restricts the addition of new records.

D) prevents users from deleting outdated data from records or tables.

Answer:  A

Page Ref: 94

Objective:  Learning Objective 4

Difficulty :  Moderate

AACSB:  Analytic

33) The update anomaly in file-based systems or unnormalized database tables

A) occurs because of data redundancy.

B) restricts addition of new fields or attributes.

C) results in records that cannot be updated.

D) is usually easily detected by users.

Answer:  A

Page Ref: 94

Objective:  Learning Objective 4

Difficulty :  Moderate

AACSB:  Analytic

34) In a relational database, requiring that every record in a table have a unique identifier is called the

A) entity integrity rule.

B) referential integrity rule.

C) unique primary key rule.

D) foreign key rule.

Answer:  A

Page Ref: 96

Objective:  Learning Objective 5

Difficulty :  Easy

AACSB:  Analytic

35) The database requirement that foreign keys must be null or have a value corresponding to the value of a primary key in another table is formally called the

A) entity integrity rule.

B) referential integrity rule.

C) rule of keys.

D) foreign key rule.

Answer:  B

Page Ref: 96

Objective:  Learning Objective 5

Difficulty :  Easy

AACSB:  Analytic

36) In a well-structured database, the constraint that ensures the consistency of the data is known as the

A) entity integrity rule.

B) referential integrity rule.

C) logical view.

D) consistency integrity rule.

Answer:  B

Page Ref: 96

Objective:  Learning Objective 5

Difficulty :  Easy

AACSB:  Analytic

37) Which statement below is false regarding the basic requirements of the relational data model?

A) Every column in a row must be single-valued.

B) All non-key attributes in a table should describe a characteristic about the object identified by the primary key.

C) Foreign keys, if not null, must have values that correspond to the value of a primary key in another table.

D) Primary keys can be null.

Answer:  D

Page Ref: 96

Objective:  Learning Objective 5

Difficulty :  Easy

AACSB:  Analytic

38) Identify the aspect of a well-structured database that is incorrect.

A) Data is consistent.

B) Redundancy is minimized and controlled.

C) All data is stored in one table or relation.

D) The primary key of any row in a relation cannot be null.

Answer:  C

Page Ref: 96

Objective:  Learning Objective 5

Difficulty :  Easy

AACSB:  Analytic

39) In the database design approach known as normalization, the first assumption made about data is

A) there is no redundancy in the data.

B) the delete anomaly will not apply since all customer records will be maintained indefinitely.

C) everything is initially stored in one large table.

D) the data will not be maintained in 3NF tables.

Answer:  C

Page Ref: 97

Objective:  Learning Objective 5

Difficulty :  Moderate

AACSB:  Analytic

40) The database design method in which a designer uses knowledge about business processes to create a diagram of the elements to be included in the database is called

A) normalization.

B) decentralization.

C) geometric data modeling.

D) semantic data modeling.

Answer:  D

Page Ref: 97

Objective:  Learning Objective 5

Difficulty :  Easy

AACSB:  Analytic

41) Which of the statements below is incorrect?

A) Semantic data modeling facilitates the efficient design of databases.

B) Semantic data modeling facilitates communicating with the intended users of the system.

C) Semantic data modeling allows a database designer to use knowledge about business processes to design the database.

D) Semantic data modeling follows the rules of normalization in the design of a database.

Answer:  D

Page Ref: 97

Objective:  Learning Objective 5

Difficulty :  Moderate

AACSB:  Analytic

42) What is one potential drawback in the design and implementation of database systems for accounting?

A) Double-entry accounting relies on redundancy as part of the accounting process but well-designed database systems reduce and attempt to eliminate redundancy.

B) Relational DBMS query languages will allow financial reports to be prepared to cover whatever time periods managers want to examine.

C) Relational DBMS provide the capability of integrating financial and operational data.

D) Relational DBMS can accommodate multiple views of the same underlying data; therefore, tables storing information about assets can include data about both historical and replacement costs.

Answer:  A

Page Ref: 104

Objective:  Learning Objective 4

Difficulty :  Moderate

AACSB:  Reflective Thinking

43) Which is probably the most immediate and significant effect of database technology on accounting?

A) replacement of the double entry-system

B) change in the nature of financial reporting

C) elimination of traditional records such as journals and ledgers

D) quicker access to and greater use of accounting information in decision-making

Answer:  D

Page Ref: 105

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Reflective Thinking

44) In a well-designed and normalized database, which of the following attributes would be a foreign key in a cash receipts table?

A) Customer number

B) Cash receipt date

C) Remittance advice number

D) Customer check number

Answer:  A

Page Ref: 96

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

45) Dana Halsey is chair of the Purebred Marmoset Society, which maintains a database of registered purebred marmosets and their breeding history. One table will store the name, birth date, and other characteristics of all of the marmosets that have been registered. Each marmoset is uniquely identified by a registration number. A second table will contain data that link each marmoset to its male and female parents by means of their registration numbers. The primary key in the first table is:

A) name

B) birth date

C) a foreign key in the second table.

D) the primary key in the second table.

Answer:  C

Page Ref: 96

Objective:  Learning Objective 5

Difficulty :  Moderate

AACSB:  Reflective Thinking

46) Dana Halsey is chair of the Purebred Marmoset Society, which maintains a database of registered purebred marmosets and their breeding history. One table will store the name, birth date, and other characteristics of all of the marmosets that have been registered. Each marmoset is uniquely identified by a registration number. A second table will contain data that link each marmoset to its male and female parents by means of their registration numbers. The primary key in the second table is:

A) name

B) birth date

C) a combination of primary keys in the first table

D) the same as the primary key in the first table

Answer:  C

Page Ref: 96

Objective:  Learning Objective 5

Difficulty :  Difficult

AACSB:  Reflective Thinking

47) Dana Halsey is chair of the Purebred Marmoset Society, which maintains a database of registered purebred marmosets and their breeding history. One table will store the name, birth date, and other characteristics of all of the marmosets that have been registered. Each marmoset is uniquely identified by a registration number. A second table will contain data that link each marmoset to its male and female parents by means of their registration numbers. The entities described by the second table are:

A) marmosets

B) parental relationships

C) registration numbers

D) names

Answer:  B

Page Ref: 96

Objective:  Learning Objective 5

Difficulty :  Moderate

AACSB:  Reflective Thinking

48) Dana Halsey is chair of the Purebred Marmoset Society, which maintains a database of registered purebred marmosets and their breeding history. One table will store the name, birth date, and other characteristics of all of the marmosets that have been registered. Each marmoset is uniquely identified by a registration number. A second table will contain data that link each marmoset to its male and female parents by means of their registration numbers. The entities described by the first table are:

A) marmosets

B) parental relationships

C) registration numbers

D) names

Answer:  A

Page Ref: 96

Objective:  Learning Objective 5

Difficulty :  Moderate

AACSB:  Reflective Thinking

49) Dana Halsey is chair of the Purebred Marmoset Society, which maintains a database of registered purebred marmosets and their breeding history. One table will store the name, birth date, and other characteristics of all of the marmosets that have been registered. Each marmoset is uniquely identified by a registration number. A second table will contain data that link each marmoset to its male and female parents by means of their registration numbers. The primary key in the first table is:

A) name

B) registration number

C) date of birth

D) relationship number

Answer:  B

Page Ref: 96

Objective:  Learning Objective 5

Difficulty :  Moderate

AACSB:  Reflective Thinking

50) Dana Halsey is chair of the Purebred Marmoset Society, which maintains a database of registered purebred marmosets and their breeding history. One table will store the name, birth date, and other characteristics of all of the marmosets that have been registered. Each marmoset is uniquely identified by a registration number. A second table will contain data that link each marmoset to its male and female parents by means of their registration numbers. The primary key in the second table is:

A) name

B) registration number

C) date of birth

D) relationship number

Answer:  D

Page Ref: 96

Objective:  Learning Objective 5

Difficulty :  Moderate

AACSB:  Reflective Thinking

51) Scuz Bootes has been doing custom choppers, piercings, and tattoos for over thirty years. His home and place of business is a garage in the harbor district of Seattle, Washington. He has meticulous records of every job he has ever done, carefully handwritten with the customer name and address, a description of the job, and an attached picture of the bike or body part before and after customization. His unique style has recently attracted the attention of national media after several celebrities sought him out and showcased his work. Business is booming. Consequently, Scuz has hired you to construct an accounting information system, beginning with the historical records. As you read through the records, you notice that some customer last names have different first names in different records. For example, R. Framington Farnsworth (custom chopper), Bob Farnsworth (tattoo), and Snake Farnsworth (tattoos and piercings) all seem to be the same person. This is an example of what type of problem in the existing records?

A) Entity integrity

B) Referential integrity

C) Update anomaly

D) Insert anomaly

Answer:  C

Page Ref: 94

Objective:  Learning Objective 4

Difficulty :  Moderate

AACSB:  Reflective Thinking

52) Scuz Bootes has been doing custom choppers, piercings, and tattoos for over thirty years. His home and place of business is a garage in the harbor district of Seattle, Washington. He has meticulous records of every job he has ever done, carefully handwritten with the customer name and address, a description of the job, and an attached picture of the bike or body part before and after customization. His unique style has recently attracted the attention of national media after several celebrities sought him out and showcased his work. Business is booming. Consequently, Scuz has hired you to construct an accounting information system, beginning with the historical records. As you read through the records, you notice that some describe multiple services. For example, Sheila Yasgur (notation: won lottery) got a custom chopper, multiple tattoos, and piercings in undisclosed locations (no pictures.) You realize that, in these cases, a single written record will have to be translated into multiple sales records. This is an example of what type of problem in the existing records?

A) Entity integrity

B) Referential integrity

C) Update anomaly

D) Insert anomaly

Answer:  D

Page Ref: 94

Objective:  Learning Objective 4

Difficulty :  Moderate

AACSB:  Reflective Thinking

53) Scuz Bootes has been doing custom choppers, piercings, and tattoos for over thirty years. His home and place of business is a garage in the harbor district of Seattle, Washington. He has meticulous records of every job he has ever done, carefully handwritten with the customer name and address, a description of the job, and an attached picture of the bike or body part before and after customization. His unique style has recently attracted the attention of national media after several celebrities sought him out and showcased his work. Business is booming. Consequently, Scuz has hired you to construct an accounting information system, beginning with the historical records. As you read through the records, you notice that some customer last names have different first names in different records. For example, R. Framington Farnsworth (custom chopper), Bob Farnsworth (tattoo), and Snake Farnsworth (tattoos and piercings) all seem to be the same person. You explain to Scuz that every customer must be identified by a unique customer number in the AIS. You are referring to the

A) entity integrity rule.

B) referential integrity rule.

C) update anomaly.

D) insert anomaly.

Answer:  A

Page Ref: 96

Objective:  Learning Objective 4

Difficulty :  Moderate

AACSB:  Reflective Thinking

54) Scuz Bootes has been doing custom choppers, piercings, and tattoos for over thirty years. His home and place of business is a garage in the harbor district of Seattle, Washington. He has meticulous records of every job he has ever done, carefully handwritten with the customer name and address, a description of the job, and an attached picture of the bike or body part before and after customization. His unique style has recently attracted the attention of national media after several celebrities sought him out and showcased his work. Business is booming. Consequently, Scuz has hired you to construct an accounting information system, beginning with the historical records. You begin development of the relational database that will form the core of the AIS by envisioning the record stored in a single table with a column that represents each attribute. You then begin to break this table down into smaller tables. This process is called

A) integration.

B) optimization.

C) minimization.

D) normalization.

Answer:  D

Page Ref: 97

Objective:  Learning Objective 5

Difficulty :  Easy

AACSB:  Reflective Thinking

55) Chelsana Washington is a medical equipment sales representative. Her company has provided her with a laptop computer that uses wireless connectivity to access the accounting information system from virtually anywhere in the country. She, and the other sales reps, have access to view customer and product information. They have access that allows them to enter and cancel customer orders. The permissions for Chelsana define a(an) ________ in the company’s database management system.

A) conceptual-level schema

B) subschema

C) data dictionary

D) physical view

Answer:  B

Page Ref: 90

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

56) Chelsana Washington is a medical equipment sales representative. Her company has provided her with a laptop computer that uses wireless connectivity to access the accounting information system from virtually anywhere in the country. She, and the other sales reps, have access to view customer and product information. They have access that allows them to enter and cancel customer orders. The permissions for the sales reps define a(an) ________ in the company’s database management system.

A) conceptual-level schema

B) external-level schema

C) data dictionary

D) physical view

Answer:  B

Page Ref: 90

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

57) Shandra Bundawi is a new graduate who has been hired by an old-line, family-owned furniture manufacturing company in the northeast. She has been asked to analyze the company’s accounting information system and to recommend cost-effective improvements. After noting that the production and sales departments use database systems that are entirely separated, she recommends that they be combined. Implementation of her recommendation would benefit the company by contributing to data

A) independence.

B) integration.

C) redundancy.

D) qualifications.

Answer:  B

Page Ref: 89

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Reflective Thinking

58) Scuz Bootes has been doing custom choppers, piercings, and tattoos for over thirty years. His home and place of business is a garage in the harbor district of Seattle, Washington. He has meticulous records of every job he has ever done. These have been entered into a computerized accounting information system that his accountant refers to as a “data warehouse.” Scuz is considering an expansion of his business into scarification, and has asked his accountant to identify past customers who might be likely candidates for this service. Scuz wants his accountant to engage in

A) customer auditing.

B) customer resource management.

C) data mining.

D) enterprise resource planning.

Answer:  C

Page Ref: 89

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Reflective Thinking

59) Heidi Holloway is a headhunter with Career Funnel in Boca Raton, Florida. Heidi is proud of the company’s motto: We funnel workers into jobs. The foundation of CF’s success is its accounting information system. When a client is placed with an employer, a record is created that identifies the employment relationship. CF follows up on placements by surveying both employers and clients about the employment experience and then entering the results into the AIS. Clients are uniquely identified by social security number. In records that contain client survey data,the social security number number is likely to be

A) the primary key.

B) a foreign key.

C) combined with other data fields to form a primary key.

D) null.

Answer:  B

Page Ref: 96

Objective:  Learning Objective 5

Difficulty :  Moderate

AACSB:  Reflective Thinking

60) The data on this sales invoice would be generated from how many well-structured tables in a well-designed relational database?

A) 6

B) 5

C) 4

D) 7

Answer:  A

Page Ref: 96

Objective:  Learning Objective 5

Difficulty :  Difficult

AACSB:  Reflective Thinking

61) Which of the following would not be one of the well-structured tables in a well-designed relational database used to generate this sales invoice?

A) Customer Order

B) Customer

C) Sales

D) Sales Order

Answer:  A

Page Ref: 96

Objective:  Learning Objective 5

Difficulty :  Difficult

AACSB:  Reflective Thinking

62) Which of the following would not be true about the well-structured tables in a well-designed relational database used to generate this sales invoice?

A) Quantity would be generated from the Sales table.

B) 34567 would be a primary key in the Sales table.

C) Unit Price would be generated from the Inventory table.

D) Hardware City is an example of a non-key data value in the Customer table.

Answer:  A

Page Ref: 96

Objective:  Learning Objective 5

Difficulty :  Difficult

AACSB:  Reflective Thinking

63) Which one of the following results corresponds to the query below?

A)

B)

C)

D)

Answer:  C

Page Ref: 97-104

Objective:  Learning Objective 6

Difficulty :  Easy

AACSB:  Analytic

64) Which one of the following results corresponds to the query below?

A)

B)

C)

D)

Answer:  D

Page Ref: 97-104

Objective:  Learning Objective 6

Difficulty :  Moderate

AACSB:  Reflective Thinking

65) Which one of the following results corresponds to the query below?

A)

B)

C)

D)

Answer:  B

Page Ref: 97-104

Objective:  Learning Objective 6

Difficulty :  Moderate

AACSB:  Reflective Thinking

66) Describe a major advantage of database systems over file-oriented transaction processing systems.

Answer:  Database systems separate logical and physical views. This separation is referred to as program-data independence. Such separation facilitates developing new applications because programmers can concentrate on coding the application logic (what the program will do) and do not need to focus on how and where the various data items are stored or accessed. In the file-oriented transaction systems, programmers need to know physical location and layout of records which adds another layer of complexity to programming.

Page Ref: 88-89

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Reflective Thinking

67) What is the difference in logical view and physical view?

Answer:  The logical view is how the user or programmer conceptually organizes and understands the data, such as data organized in a table. The physical view, on the other hand, refers to how and where the data are physically arranged and stored in the computer system.

Page Ref: 90

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

68) Describe the different schemas involved in a database structure. What is the role of accountants in development of schemas?

Answer:  A schema describes the logical structure of a database. There are three levels of schemas. First, the conceptual-level schema is an organization-wide view of the entire database listing all data elements and relationships between them. Second, an external-level schema is a set of individual user views of portions of the database, each of which is referred to as a subschema. Finally, an internal-level schema provides a low-level view of the database includes descriptions about pointers, indexes, record lengths, etc. Accountants are primarily involved in the development of conceptual- and external-level schemas; however, database knowledgeable accountants may participate in developing an internal -level schema.

Page Ref: 90

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

69) Describe a data dictionary.

Answer:  A data dictionary is a means by which information about the structure of a database is maintained. For each data element stored in the database, there is a corresponding record in the data dictionary that describes it. The DBMS usually maintains the data dictionary. Inputs to the dictionary include various new data, changed data, and deleted data. Output from the data dictionary may include a variety of reports useful to programmers, database designers, and other users of the information system. Accountants have a very good understanding of the data elements that exist in a business organization, so when an organization is developing a database, accountants should be allowed to participate in the development of the data dictionary.

Page Ref: 92

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

70) Explain the types of attributes that tables possess in a relational database.

Answer:  Primary key  the attribute, or combination of attributes, that uniquely identify a specific row in a table. Foreign key  an attribute appearing in one table that is a primary key in another table. Nonkey attributes found in tables  For example, an inventory table may contain information about the description, quantity on hand, and list price of each item a company sells.

Page Ref: 92

Objective:  Learning Objective 4

Difficulty :  Easy

AACSB:  Analytic

71) Explain the two advantages semantic data modeling has over normalization when designing a relational database.

Answer:  Semantic data modeling takes advantage of a system designer’s knowledge about the business policies and practices of an organization. This is of great benefit in the design of transaction processing databases. Also, since the database model is created around the policies and practices of an organization, communications with the future database users is facilitated. The result is that the system will more closely meet the needs of the intended users.

Page Ref: 97

Objective:  Learning Objective 4

Difficulty :  Moderate

AACSB:  Analytic

72) Explain the difference between file-oriented transaction processing systems and relational database systems. Discuss the advantages and disadvantages of each system.

Answer:  In file-oriented approaches, different users (or departments, units, etc.) maintain their own data and use different application programs. This results in a significant increase in number of master files stored by an organization. The various disadvantages of file-oriented organization include data redundancy, data inconsistencies, lack of data integration, a large number of data files, substantial program-data dependence, lack of compatibility, and lack of data sharing. The database approach views data as an organizational resource that should be used and managed for the entire organization. The program that manages and controls the data and the interfaces between data and application programs is called the database management system (DBMS). The various advantages of database approach include the following: minimal data redundancy, fewer data inconsistencies, data integration, data sharing, reporting flexibility, central management of data, cross-functional analysis, and data independence.

Page Ref: 87-88

Objective:  Learning Objective 1

Difficulty :  Moderate

AACSB:  Reflective Thinking

73) Discuss redundancy as it applies to database design.

Answer:  Redundancy has been called an enemy of relational databases. There are several problems that may occur when redundant data is stored in a database. First, the database becomes larger than it needs to be, since duplicate facts are being stored within it. Second, a situation may occur where only one instance of redundant data is updated or purged. The result is that the accuracy and integrity of the database suffers, since users may be relying on such inaccurate or incorrect redundant data. Redundancy can also make file maintenance unnecessarily time consuming and error-prone when human intervention is required. The problems discussed above have been identified as anomalies of a relational database. There are three specific anomalies connected with redundancy: the update anomaly, the insert anomaly, and the delete anomaly. A well-designed relational database will attempt to reduce or eliminate the number of instances of redundant data. The best way to achieve such a goal is proper design of the database for the needs of a specific organization.

Page Ref: 94

Objective:  Learning Objective 4

Difficulty :  Difficult

AACSB:  Reflective Thinking

74) Discuss the ways in which a well-designed DBMS will facilitate the three basic functions of creating, changing, and querying data.

Answer:  A DBMS will use data definition, data manipulation, and data query languages in order to perform the three basic, essential data functions. Data definition is achieved using DDL (data definition language); data manipulation is achieved using DML (data manipulation language) which includes operations such as updating, inserting, and deleting portions of the database. DQL (data query language) is used to retrieve, sort, order, and present subsets of data in response to user queries. A DBMS will probably also include a report writer, which is a language that simplifies report creation.

Page Ref: 92

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Analytic

75) List the four DBMS “languages” and describe who uses each and for what purpose.

Answer:  DDL is the data definition language used by the DBA (database administrator) to create, initialize, describe logical views, and specify security limits. The DML is the data manipulation used by application programmers who embed these action commands into applications to access data in the database. The DQL is the data query language used by IT professionals and users to interrogate the database by retrieving and presenting data in novel ways often on an ad hoc basis. The report writer is a language used by IT professionals and users that simplifies report creation so reports can be created according to user-specified format.

Page Ref: 92

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Analytic

76) Describe the information that is contained in the data dictionary.

Answer:  The data dictionary contains information about the structure of the database. For each data element stored in the database, the data dictionary contains all the descriptive information about it, such as its name, description, where it is recorded, its source, field length, type of field, programs it is used in, outputs that contain it, and authorized users.

Page Ref: 92

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

77) Explain the relational database data model.

Answer:  A data model is an abstract representation of the contents of a database. The majority of new DMBS use what is called the relational data model, developed by Dr. E. F. Codd in 1970. Using this model, everything in the database is stored in the form of tables, known as relations. Keep in mind that this is the conceptual- and external-level schemas (which describes the logical structure of a database), not the actual physical structure of the database itself. In the concept of relations, both rows and columns comprise the database tables. Each row in a relation (table) is called a tuple. Tuples contain data about a specific occurrence of the type of entity represented by that table. For example, in a sales table, each tuple may contain all of the information about a specific customer. Each column in a relation contains information about one specific attribute of that entity. Using the sales example again, the columns in such a table may represent specific characteristics about each sales transaction.

Page Ref: 92

Objective:  Learning Objective 4

Difficulty :  Moderate

AACSB:  Analytic

78) What are the basic requirements when logically designing a relational database model?

Answer:  Every row in every table must have a unique key known as a primary key. Tables may also have a key known as a foreign key; such a key will have a value corresponding to the primary key in another table. Each column in a table must be single-valued (the same data type) and describe an attribute of the entity identified by the primary key; neither column nor row order is significant in the relational model. Keep in mind that the relational model is a logical model, and the physical model may have a different structure to it to facilitate the storage and access to data.

Page Ref: 96

Objective:  Learning Objective 4

Difficulty :  Moderate

AACSB:  Analytic

79) Describe what you think will be the main impact of database technology in your career.

Answer:  Answers to this question could cover a wide range. Most likely the following items will be discussed or mentioned:

 the probable demise of the double-entry system as the need for such redundancy is much less in a database system.

 financial reporting may become more of accessing a database of corporate data in the format desired by the user than relying on financial reports prepared by accountants.

 accountants will no longer need to be the filter for accounting data as users will be able to do this themselves, thus the accountants may become more decision makers and managers.

 the whole notion of internal controls will become more important in the future if the accountants’ role changes in relation to financial reporting.

Page Ref: 104-105

Objective:  Learning Objective 1

Difficulty :  Difficult

AACSB:  Reflective Thinking

80) Chagall Curtain Company is changing from a file-oriented system to a relational database system. Design at least three tables that would be needed to capture data for a sales transaction. Each table should include a primary key, three non-key attributes, and foreign keys as necessary. Make up data values for two records within each table.

Answer:  Customer table; ID (primary key), name, street address, city, state, zip code, phone number, credit limit, salesperson ID (foreign key)

Salesperson table; ID (primary key), name, street address, city, state, zip code, phone number, hire date, commission rate, base salary

Sales table; sales invoice number (primary key), date, amount, sales tax, shipping charge, shipping method, customer ID (foreign key), salesperson ID (foreign key)

Inventory table; item ID (primary key), description, size, color, warehouse location, list price, quantity on hand

Sales-Inventory table; sales invoice number and item ID (concatenated primary key), quantity sold, sales price, extended amount

Students should also make up data values for two separate records for each table.

Page Ref: 94-96

Objective:  Learning Objective 5

Difficulty :  Difficult

AACSB:  Reflective Thinking

Chapter 5  

1) Perhaps the most striking fact about natural disasters in relation to AIS controls is that

A) many companies in one location can be seriously affected at one time by a disaster.

B) losses are absolutely unpreventable.

C) there are a large number of major disasters every year.

D) disaster planning has largely been ignored in the literature.

Answer:  A

Page Ref: 121

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

2) Which of the following best describes lapping?

A) Applying cash receipts to a different customer’s account in an attempt to conceal previous thefts of cash receipts.

B) Inflating bank balances by transferring money among different bank accounts.

C) Increasing expenses to conceal that an asset was stolen.

D) Stealing small amounts of cash, many times over a period of time.

Answer:  A

Page Ref: 128

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

3) Which of the following is the greatest risk to information systems and causes the greatest dollar losses?

A) human errors and omissions

B) physical threats such as natural disasters

C) dishonest employees

D) fraud and embezzlement

Answer:  A

Page Ref: 122

Objective:  Learning Objective 1

Difficulty :  Easy

AACSB:  Analytic

4) All of the following could lead to computer fraud except

A) allowing computer operators full access to the computer room.

B) releasing data to unauthorized users.

C) allowing computer users to test software upgrades.

D) storing backup tapes in a location where they can be quickly accessed.

Answer:  A

Page Ref: 131-134

Objective:  Learning Objective 4

Difficulty :  Easy

AACSB:  Analytic

5) Which of the following is not an example of the fraud triangle characteristic concerned with easing a fraudster’s conscience?

A) Revenge against the company

B) Sense of entitlement as compensation for receiving a lower than average raise

C) Intent to repay “borrowed” funds in the future

D) Belief that the company won’t suffer because an insurance company will reimburse losses

Answer:  A

Page Ref: 130

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

6) Most fraud perpetrators are insiders because

A) insiders are more dishonest than outsiders.

B) insiders know more about the system and its weaknesses than outsiders.

C) outsiders are more likely to get caught than insiders.

D) insiders have more need for money than outsiders.

Answer:  B

Page Ref: 126

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

7) Most frauds are detected by

A) external auditors.

B) internal auditors.

C) accident.

D) hotline tip.

Answer:  D

Page Ref: 135

Objective:  Learning Objective 5

Difficulty :  Easy

AACSB:  Analytic

8) Amy wants to open a floral shop in a downtown business district. She doesn’t have funds enough to purchase inventory and pay six months rent up front. Amy approaches a good friend, Coleen, to discuss the possibility of Coleen investing funds and becoming a 25% partner in the business. After a lengthy discussion Coleen agrees to invest. Eight months later, Coleen and Amy have a falling out. In order for Coleen to sue Amy for fraud, all the following must be true except

A) Amy told Coleen she had worked at a floral shop for several years, when in fact she did not have any prior experience in floral retail.

B) Coleen’s decision to invest was primarily based on Amy’s assertion that she had prior floral retail experience.

C) Coleen’s 25% share of the business is worth substantially less than her initial investment.

D) Before Coleen invested, Amy prepared a detailed business plan and sales forecasts, and provided Coleen with copies.

Answer:  D

Page Ref: 123

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Reflective Thinking

9) Perpetrators of theft of company assets typically exhibit all the following characteristics except that they

A) attempt to return or pay back stolen amounts soon after the initial theft, but find they are unable to make full restitution.

B) use trickery or lies to gain the confidence and trust of others at the organization they defraud.

C) become bolder and more greedy the longer the theft remains undetected.

D) begin to rely on stolen amounts as part of their income.

Answer:  A

Page Ref: 124-125

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

10) “Cooking the books” is typically accomplished by all the following except

A) inflating accounts payable.

B) accelerating recognition of revenue.

C) delaying recording of expenses.

D) overstating inventory.

Answer:  A

Page Ref: 125

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Analytic

11) SAS No. 99 requires that auditors

A) plan audits based on an analysis of fraud risk.

B) detect all material fraud.

C) alert the Securities and Exchange Commission of any fraud detected.

D) take all of the above actions.

Answer:  A

Page Ref: 125

Objective:  Learning Objective 2

Difficulty :  Difficult

AACSB:  Analytic

12) Which of the following is not a management characteristic that increases pressure to commit fraudulent financial reporting?

A) Close relationship with the current audit engagement partner and manager

B) Pay for performance incentives based on short-term performance measures

C) High management and employee turnover

D) Highly optimistic earnings projections

Answer:  A

Page Ref: 128

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

13) Intentional or reckless conduct that results in materially misleading financial statements is called

A) financial fraud.

B) misstatement fraud.

C) fraudulent financial reporting.

D) audit failure fraud.

Answer:  C

Page Ref: 125

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

14) Researchers have compared the psychological and demographic characteristics of white-collar criminals, violent criminals, and the general public. They found that

A) few differences exist between white-collar criminals and the general public.

B) white-collar criminals eventually become violent criminals.

C) most white-collar criminals invest their illegal income rather than spend it.

D) most white-collar criminals are older and not technologically proficient.

Answer:  A

Page Ref: 126

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

15) Which of the following is an opportunity that could contribute to employee fraud?

A) an employee’s spouse loses their job

B) an employee suddenly acquires lots of credit cards

C) an employee is upset that he was passed over for a promotion

D) close association with suppliers or customers

Answer:  D

Page Ref: 129

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Analytic

16) Which of the following is a financial pressure that could cause an employee to commit fraud?

A) a feeling of not being appreciated

B) failing to receive a deserved promotion

C) believing that their pay is too low relative to others around them

D) having a spouse injured in a car accident and in the hospital for several weeks

Answer:  D

Page Ref: 127

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Analytic

17) Opportunity to commit fraud is comprised of three stages. The stage that often takes most time and effort would include

A) stealing inventory from the warehouse.

B) selling stolen inventory to get cash.

C) lapping accounts receivable.

D) creating false journal entries to overstate revenue.

Answer:  C

Page Ref: 128

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

18) In many cases of fraud, the ________ takes more time and effort than the ________.

A) concealment; theft

B) theft; concealment

C) conversion; theft

D) conversion; concealment

Answer:  A

Page Ref: 128

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

19) Which of the following is the best way to hide theft of assets?

A) Creating “cash” through the transfer of money between banks

B) Conversion of stolen assets into cash

C) Stealing cash from customer A and then using customer B’s balance to pay customer A’s accounts receivable

D) Charging the stolen asset to an expense account

Answer:  D

Page Ref: 128

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

20) In a ________ scheme, customer receipts are stolen and then subsequent payments by other customers are misapplied to cover the theft of the original receipts.

A) kiting

B) laundering

C) bogus expense

D) lapping

Answer:  D

Page Ref: 128

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

21) One fraudulent scheme covers up a theft by creating cash through the transfer of money between banks. This is known as

A) lapping.

B) misappropriation of assets.

C) kiting.

D) concealment.

Answer:  C

Page Ref: 128

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

22) Which characteristic of the fraud triangle often stems from a lack of internal controls within an organization?

A) pressure

B) opportunity

C) rationalization

D) concealment

Answer:  B

Page Ref: 129

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

23) Which situation below makes it easy for someone to commit a fraud?

A) placing excessive trust in key employees

B) inadequate staffing within the organization

C) unclear company policies

D) All of the above situations make it easy for someone to commit a fraud.

Answer:  D

Page Ref: 129

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

24) What is the most prevalent opportunity within most companies to commit fraud?

A) lack of any internal controls

B) failure to enforce the internal controls

C) loopholes in the design of internal controls

D) management’s failure to believe employees would commit fraud

Answer:  B

Page Ref: 129

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Analytic

25) Which characteristic of the fraud triangle relates to excuses that perpetrators use to justify their illegal behavior?

A) pressure

B) opportunity

C) rationalization

D) concealment

Answer:  C

Page Ref: 130

Objective:  Learning Objective 3

Difficulty :  Easy

AACSB:  Analytic

26) The US Justice Department defines computer fraud as

A) any crime in which a computer is used.

B) an illegal act in which knowledge of computer technology is essential.

C) any act in which cash is stolen using a computer.

D) an illegal act in which a computer is an integral part of the crime.

Answer:  B

Page Ref: 130

Objective:  Learning Objective 4

Difficulty :  Moderate

AACSB:  Analytic

27) The most efficient way to conceal asset misappropriation is to

A) write-off a customer receivable as bad debt.

B) alter monthly bank statements before reconciliation.

C) alter monthly physical inventory counts to reconcile to perpetual inventory records.

D) record phony payments to vendors.

Answer:  A

Page Ref: 128

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Reflective Thinking

28) Computer fraud is often much more difficult to detect than other types of fraud because

A) perpetrators usually only steal very small amounts of money at a time, thus requiring a long period of time to have elapsed before they’re discovered.

B) massive fraud can be committed in only seconds, leaving little or no evidence.

C) most perpetrators invest their illegal income rather than spend it, thus concealing key evidence.

D) most computer criminals are older and are considered to be more cunning when committing such a fraud.

Answer:  B

Page Ref: 130

Objective:  Learning Objective 4

Difficulty :  Moderate

AACSB:  Analytic

29) Why is computer fraud often more difficult to detect than other types of fraud?

A) Rarely is cash stolen in computer fraud.

B) The fraud may leave little or no evidence it ever happened.

C) Computers provide more opportunities for fraud.

D) Computer fraud perpetrators are just more clever than other types of criminals.

Answer:  B

Page Ref: 130

Objective:  Learning Objective 4

Difficulty :  Easy

AACSB:  Analytic

30) Why do many fraud cases go unreported and unprosecuted?

A) Major fraud is a public relations nightmare.

B) Fraud is difficult, costly, and time-consuming to investigate and prosecute.

C) Law enforcement and the courts are often so busy with violent crimes that little time is left for fraud cases.

D) all of the above

Answer:  D

Page Ref: 131

Objective:  Learning Objective 4

Difficulty :  Easy

AACSB:  Analytic

31) The fraud that requires the least computer knowledge or skill involves

A) altering or falsifying source data.

B) unauthorized use of computers.

C) tampering with or copying software.

D) forging documents like paychecks.

Answer:  A

Page Ref: 131

Objective:  Learning Objective 4

Difficulty :  Moderate

AACSB:  Reflective Thinking

32) The simplest and most common way to commit a computer fraud is to

A) alter computer input.

B) alter computer output.

C) modify the processing.

D) corrupt the database.

Answer:  A

Page Ref: 131

Objective:  Learning Objective 4

Difficulty :  Easy

AACSB:  Analytic

33) Downloading a master list of customers and selling it to a competitor is an example of

A) data fraud.

B) output theft.

C) download fraud.

D) fraudulent financial reporting.

Answer:  A

Page Ref: 133

Objective:  Learning Objective 4

Difficulty :  Easy

AACSB:  Analytic

34) Which of the following will not reduce the likelihood of an occurrence of fraud?

A) encryption of data and programs

B) use of forensic accountants

C) adequate insurance coverage

D) required vacations and rotation of duties

Answer:  C

Page Ref: 134-135

Objective:  Learning Objective 5

Difficulty :  Easy

AACSB:  Analytic

35) Which of the following is not an example of one of the basic types of fraud?

A) While straightening the store at the end of the day, a shoe store employee finds and keeps an expensive pair of sunglasses left by a customer.

B) An executive devised and implemented a plan to accelerate revenue recognition on a long-term contract, which will allow the company to forestall filing for bankruptcy. The executive does not own any stock, stock options or grants, and will not receive a bonus or perk because of the overstated revenue.

C) A purchasing agent places a large order at higher-than-normal unit prices with a vendor that gave the agent tickets to several football games.

D) A salesperson approves a large sales discount on an order from a company owned partially by the salesperson’s sister.

Answer:  A

Page Ref: 124-125

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Reflective Thinking

36) On Monday morning, Janet Pillsner, Chief Information Officer at International Securities Corporation (ISC), got some bad news. A tape used to store system data backups was lost while it was being transported to an offsite storage location. She called a meeting of her technical staff to discuss the implications of the loss. Which of the following is most likely to relieve her concerns over the potential cost of the loss?

A) The shipper has insurance that will reimburse ISC for the cost of the tape.

B) ISC has a copy of the tape onsite, so a new copy for storage offsite can easily be prepared.

C) The tape was encrypted and password protected.

D) ISC has a comprehensive disaster recovery plan.

Answer:  C

Page Ref: 135

Objective:  Learning Objective 5

Difficulty :  Easy

AACSB:  Reflective Thinking

37) A simple method for catching or preventing many types of employee fraud is to

A) monitor all employee behavior using video cameras.

B) require all employees to take annual vacations.

C) explain to employees that fraud is illegal and that it will be severely punished.

D) monitor employee bank accounts and net worth.

Answer:  B

Page Ref: 134

Objective:  Learning Objective 5

Difficulty :  Easy

AACSB:  Analytic

38) Describe two kinds of fraud.

Answer:  Misappropriation of assets, or theft, by a person or group for personal financial gain is usually committed by employees. Fraudulent financial reporting is intentional or reckless conduct that results in materially misleading financial statements.

Page Ref: 124-125

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

39) What are the actions recommended by the Treadway Commission to reduce the possibility of fraudulent financial reporting?

Answer:  Establish an organizational environment that contributes to the integrity of the financial reporting process. Identify and understand the factors that lead to fraudulent financial reporting. Assess the risk of fraudulent financial reporting within the company. Design and implement internal controls to provide reasonable assurance that the fraudulent financial reporting is prevented.

Page Ref: 125

Objective:  Learning Objective 5

Difficulty :  Moderate

AACSB:  Analytic

40) Explain the impact of SAS No. 99 on auditors’ responsibilities.

Answer:  SAS No. 99, effective December 2002, requires that auditors explicitly consider fraud risks when planning and performing an audit. Auditors must understand types and characteristics of fraud. Audit teams must review clients’ financial statements for areas susceptible to fraud and communicate with each other during planning of the audit. Auditors must ask management and audit committee members about any past or current instances of fraud. Since many frauds involve revenue recognition, auditors must exercise special care and testing in examining revenue accounts. Audit procedures and testing must be tailored in response to fraud risk assessment. Auditors must evaluate the risk of management override of controls and any other indications of fraud occurrences. All audit procedures, testing and findings must be documented and communicated to management and the audit committee. Auditors must evaluate and recognize the impact of technology on fraud risks, as well as opportunities technology may provide to design fraud-auditing procedures.

Page Ref: 125-126

Objective:  Learning Objective 2

Difficulty :  Moderate

AACSB:  Analytic

41) Why is computer fraud on the rise?

Answer:  Not everyone agrees on what constitutes computer fraud and some people may commit computer fraud unwittingly and not be aware of it. Many computer frauds go undetected. The belief that “it just can’t happen to us.” Most networks have a low level of security. Many Internet sites provide guidance on how to commit computer crimes. Law enforcement is unable to keep up with the number of computer frauds. Most frauds are not reported. The total dollar value of losses is difficult to calculate.

Page Ref: 131

Objective:  Learning Objective 4

Difficulty :  Moderate

AACSB:  Reflective Thinking

42) Describe at least four ways a company can make fraud less likely to occur.

Answer:  A company can decrease fraud by: good hiring and firing practices; good management of unhappy employees; training in fraud awareness; manage and track computer licenses; implement signed confidentiality agreements; maintain visible security; educate the workforce in ethics and the penalties for illegal acts.

Page Ref: 134-135

Objective:  Learning Objective 5

Difficulty :  Moderate

AACSB:  Analytic

43) Describe four ways companies can reduce losses from fraud.

Answer:  Maintain adequate insurance. Keep a current backup copy of all program and data files in a secure off-site location. Develop a contingency plan for fraud occurrences and other disasters that might occur. Use special software designed to monitor system activity and help companies recover from frauds and malicious actions.

Page Ref: 135

Objective:  Learning Objective 5

Difficulty :  Easy

AACSB:  Analytic

44) What are some of the distinguishing characteristics of fraud perpetrators?

Answer:  Some distinguishing characteristics of fraud perpetrators are: they tend to spend their illegal income to support their lifestyle; once they begin it becomes harder to stop and they become bolder as each incident happens; once they start to rely on the ill-gotten gains, they become more greedy and sometimes careless and overconfident. In the case of computer criminals, they are often young and have substantial computer knowledge. About two-thirds are men and likely to be an employee of the firm from which they steal. Many are unhappy or disgruntled with their employer because they feel unappreciated and underpaid. Most have no previous criminal record.

Page Ref: 126

Objective:  Learning Objective 3

Difficulty :  Moderate

AACSB:  Analytic

45) Why do fraudulent acts often go unreported and are therefore not prosecuted?

Answer:  Most fraud cases go unreported and are not prosecuted for several reasons. Many cases of computer fraud are as yet still undetected. As new technology and methods become available to organizations, prior undetected fraud may be revealed in the future. A second reason is that companies are reluctant to report computer fraud and illegal acts simply because of bad publicitya highly visible case can undermine consumer confidence in an organization such as a financial institution. Also, the fact that a fraud has occurred may indeed encourage others to attempt to commit further acts against the organization. It would seem that unreported fraud creates a false sense of security, as people think systems are more secure than they are in reality. Another reason for not reporting fraudulent acts is the fact that the court system and law enforcement is busy with violent crimes and criminals in its system. There is little time left to go after a crime where no physical harm is present. Also, the court system tends to treat teen hacking and cracking as “acts of childhood” rather than as serious crimesthis leads to many plea bargains when a computer fraud is brought to trial. Another reason is that a computer fraud case is difficult, costly, and time-consuming to investigate and prosecute. Before 1986 no federal law existed governing computer fraud. Law enforcement officials, lawyers, and judges generally lack the computer skills necessary to properly evaluate, investigate, and prosecute computer crimes. Sadly, when all is said and done a successful prosecution and conviction of computer fraud results in a very light sentence. All of these factors contribute to the underreporting and lack of prosecution of computer fraud crimes. Not everyone agrees on what constitutes computer fraud:

· Many networks have a low level of security

· Many Internet pages give instruction on how to carry out computer crimes

· Law enforcement has difficulty keep up with the growing number of computer frauds

· The total dollar value of losses from computer fraud is difficult to estimate.

Page Ref: 131

Objective:  Learning Objective 4

Difficulty :  Moderate

AACSB:  Analytic

46) A teller at a savings and loan drive-through accepted a cash payment from customer #1 for an auto loan. The teller appeared to process the payment, but told the customer the printer was jammed and she can’t print a receipt. The customer accepted the excuse and drove away. The teller pocketed the cash and wrote down customer #1’s loan number and payment amount for future reconciling. A couple of days before customer #1’s monthly statement was printed, the teller recorded a cash payment from customer #2 as if it were made by customer #1. The teller pocketed the difference between the two payments. The teller continued to steal and misapply customer payments for the next two years without detection.

Identify the type of fraud scheme described. Describe five controls you would implement to address the fraud risk, and label each control as preventive or detective.

Answer:  The fraud appears to be misappropriation of assets that is being concealed with a lapping scheme. Controls would include:

1. rotation of duties (primarily detective)

2. mandatory vacations (primarily detective)

3. surveillance with cameras (primarily detective)

4. staggered statement printing schedules, unknown to tellers (detective)

5. sequentially prenumbered, duplicate receipts (detective)

6. segregation of duties between cash handling and recording (preventive)

7. encourage customers to utilize on-line banking for loan payments and to frequently check balances (detective)

Page Ref: 134-135

Objective:  Learning Objective 5

Difficulty :  Moderate

AACSB:  Reflective Thinking

Chapter 6  

1) Wally Hewitt maintains an online brokerage account. In early March, Wally received an email from the firm that explained that there had been a computer error and that provided a phone number so that Wally could verify his customer information. When he called, a recording asked that he enter the code from the email, his account number, and his social security number. After he did so, he was told that he would be connected with a customer service representative, but the connection was terminated. He contacted the brokerage company and was informed that they had not sent the email. Wally was a victim of

A) Bluesnarfing.

B) splogging.

C) vishing.

D) typosquatting.

Answer:  C

Page Ref: 157

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

2) When a computer criminal gains access to a system by searching records or the trash of the target company, this is referred to as

A) data diddling.

B) dumpster diving.

C) eavesdropping.

D) piggybacking.

Answer:  B

Page Ref: 159

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic

3) Jerry Schneider was able to amass operating manuals and enough technical data to steal $1 million of electronic equipment by

A) scavenging.

B) skimming.

C) Internet auction fraud.

D) cyber extortion.

Answer:  A

Page Ref: 159

Objective:  Learning Objective 2

Difficulty :  Easy

AACSB:  Analytic