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1 Accounting Chapter Information Systems and the Accountant True-False Questions 1. The acronym AIS stands for Accounting Information Standards. 2. Accounting information systems must be computerized to be effective. 3. It is best to view an AIS as an accounting system that must be computerized. 4. AISs often create information that is useful to non-accountants. 5. In order to be useful, raw accounting data must be processed by a computer. 6. The path that data follow in an AIS, for example from manual source document to completed output report, is called an audit trail. 7. A company's audit trail is normally easier to follow under a manual data processing system compared to a computerized information processing system. 8. The starting point for an audit trail of a payroll system might be an employee time card. 9. The starting point for an audit trail of a production department might be the purchase of raw materials. 10. The acronym ERP stands for electronic reporting plan. 11. The term information overload refers to providing too much data to management, often resulting in managers ignoring it. 12. An advantage of computerized AISs is that they do not need to be programmed to catch simple input errors such as entering 4.0 instead of 40.0 for hours worked in a payroll application. 13. Computers tend to make audit trails easier to follow because everything is computerized. 14. The acronym ERP stands for enterprise reporting system. 15. The authors consider accountants to be knowledge workers. 16. Predictive analytics use large data warehouses to help organizations improve performance. 17. As used in this chapter, the acronym SAR stands for suspicious accounting reports. 18. Sections of the Patriot Act mandate suspicious activity reporting. 19. One of the motivations for SAR is to identify money laundering activities. TB 1.1 20. The term Patriot is an acronym for providing appropriate tools required to intercept and obstruct terrorism. 21. Section 352 of the Patriot Act requires auditors to verify that their organizations have adequate risk assessment systems. 22. Accounting systems are useful for performing accounting tasks, but cannot be used for such security purposes as countering terrorism. 23. An example of a corporate scandal that was mentioned in this chapter is the Enron case. 24. The Sarbanes-Oxley Act includes a provision that prohibits corporations from making personal loans to executives. 25. The Sarbanes-Oxley Act prohibits companies from using the same auditing firms for performing both auditing and management consulting services. 26. It costs some companies over $1 million to comply with the requirements of the Sarbanes-Oxley Act. 27. As a result of corporate bankruptcies in 2002, some of the largest public accounting firms are no longer engaged in any consulting work. 28. A major output of financial accounting is the preparation of financial statements such as an income statement. 29. The series of steps leading from data recorded in transaction records to the information reported on financial statements is called the accounting cycle. 30. AISs are only concerned with financial information. 31. One major difference between financial accounting and managerial accounting is that financial accountants prepare financial statements for external investors while managerial accountants prepare financial statements for internal managers. 32. In a responsibility accounting system, every person within a company takes responsibility for the performance of every business unit. 33. One major difference between financial accounting and managerial accounting is that financial accountants use dashboards while managerial accountants do not. 34. An example of a financial report that would be prepared by a managerial accountant (instead of a financial accountant) is a budget report. 35. XBRL is a business reporting language that is used to define interactive financial data. 36. Cost accounting tasks are usually performed by financial accountants. 37. An ABC inventory system refers to an activity-based costing system. TB 1.2 38. As used in chapter 1, the term dashboard refers to a quick and easy plan to install a computerized accounting system in an organization. 39. As used in Chapter 1, a dashboard is an up-to-the-minute graphic depiction of one or more business activities. 40. The purpose of the assurance services of an accounting firm is to give a companys managers moral support when they are audited by the federal or state government. 41. The purpose of CPA Trust Services is to provide assurance that a company engaged in electronic commerce can provide the goods or services it promises. 42. An example of a value-added reseller (VAR) is a computer dealer that adds software to the hardware it sells. 43. Some possible career opportunities for AIS majors or minors include consulting positions, computerized auditing, or computer security positions. 44. Accountants are usually classified as line workers within business organizations. 45. Today's AIS is an enterprise-wide information system that focuses on interdepartmental business processes. 46. A good audit trail within the financial accounting system should allow a manager or auditor to trace any source document back from a report to the original data entry. 47. Managerial accounting principally provides decision-making information to a company's internal managers. 48. As a result of computerized information processing systems in many organizations today, the need for accountants in these organizations has significantly declined. 49. Activity-based costing systems focus on allocating overhead on the basis of direct labor hours used. 50. Because accountants are not normally computer programmers working within the information processing subsystem, it is unnecessary for them to understand the capabilities and limitations of computers. 51. Within the traditional AIS, a sales order would not be considered an accounting transaction. 52. Students majoring in AIS are unlikely to assume jobs in traditional accounting positions because they know too much. 53. There are limited career opportunities available for students who study both accounting and information systems. 54. One possible career for AIS majors is in the traditional area of financial or managerial TB 1.3 accounting. 55. The CISA is an acronym for a professional accounting certification. Multiple-Choice Questions 56. The S in the acronym AIS stands for: a) Standard b) System c) Symbol d) none of these 57. Which of the following is true? a) An AIS must be computerized to be useful b) An AIS always produces useful information c) An AIS always produces financial information d) none of these 58. The letter P in the acronym ERP stands for: a) Production b) Planning c) Project d) none of these 59. Which of the following is true about the terms data and information within the context of Chapter 1? a) These terms are exactly the same b) These terms are exact opposites c) Some data can also be information d) none of these 60. If a manager suffers information overload: a) He or she must press the reset button on his or her computer b) It means that this person needs a larger hard drive c) The information is really data d) He or she must forget some facts in order to remember others 61. Which of the following captures the same idea as the term GIGO? a) Computers cannot turn straw into gold b) Too much information is the same as garbage c) Great investments lead to great returns d) Too many cooks spoil the broth 62. Which of the following best describes a data warehouse as discussed in Chapter 1? a) A repository of historical information from one accounting application b) A repository of historical information from a set of accounting applications c) A repository of information from many business applicationssome not accounting d) A repository of information from many businesses in the same industry TB 1.4 63. Most AISs perform all of these functions except: a) Collect raw accounting data b) Store accounting data for future uses c) Process data into useful information d) AISs perform all of these functions 64. As used in the chapter, the term knowledge workers: a) Are blue collar workers in non-managerial positions b) Are the same as delivery clerks c) Include most accountants d) Does not include most accountants 65. All of the following are possible uses of AIS or accounting personnel that were discussed in the chapter except: a) Countering terrorism b) Foiling accounting future scandals c) Providing assurance services d) Performing monetary exchanges 66. Suspicious activity reporting: a) Only applies to banking transactions b) Is mandated by state, but not federal, regulations c) Is mostly concerned with embezzlement issues d) Is a requirement under the Sarbanes-Oxley Law of 2002 e) none of these 67. Which of these would be considered suspicious activities under current SAR rules? a) Money laundering b) Bribing officials c) Transferring money to suspected terrorists d) all of these 68. Which of these businesses is not required to report suspicious activities under current federal laws? a) Banks b) Money service organizations c) Commodity Traders d) Mutual fund dealers e) Race tracks 69. Which of these statements best describes the relationship between AISs and countering terrorism? a) These are completely independent items; there is no relationship b) AISs can help counter terrorism using data warehouses c) AIS can help by denying financial aid to terrorist groups d) AISs can help by identifying international embezzlers TB 1.5 70. Bernard Madoff is most closely associated with which of the following terms? a) The father of activity-based costing systems b) SAR c) Ponzi scheme d) Sarbanes-Oxley Act of 2002 e) Key sponsor of the Patriot Act 71. Many accountants feel that the most important part of the Sarbanes-Oxley Act is: a) Its anti-terrorist provisions b) Its provisions requiring the reporting of suspicious activities c) Section 404 on internal controls d) Section 505 on money laundering 72. The U.S. Patriot act: a) Requires banks to monitor their accounts in foreign institutions for fraud b) Prohibits companies from lending money to corporate executives c) Only applies to publicly-traded companies d) all of these are correct 73. a) b) A good performance measurement system should evaluate: Profitability only Customer satisfaction only c) Those aspects of a units performance that are subject to its control d) Those aspects of a units performance whether controllable or not 74. The managerial accounting component of the accounting subsystem contains all but which one of the following functions: a) Cost accounting Financial accounting Budgeting Systems study b) c) d) 75. Managerial accounting principally provides information to: a) Stockholders b) Government regulators (e.g., SEC, Federal bank examiners) c) Internal company management d) Potential creditors 76. The process by which a financial transaction is recorded so that its flow through the system can be followed is called: a) Financial shadowing b) Managerial trace technique c) Concatenation d) An audit trail 77. Which of the following accounting functions has been automated by most companies' information processing subsystems? a) Posting to ledgers b) Recording journal entries c) Preparing trial balances d) all of the above TB 1.6 78. a) b) c) d) e) 79. a) b) The accounting subsystem must continually interact with the: Personnel subsystem Information processing subsystem Production subsystem b and c only all of the above What has been the effect on accountants in those organizations which have computerized their data processing functions? The need for accountants has disappeared The accountants have become "pure" bookkeepers c) The accountants have become involved in more decision-making activities d) The accountants' decision-making activities have drastically declined 80. What is the first step to be performed by most organizations in their accounting cycles? a) Recording business transactions in a journal b) Preparing a trial balance c) Recording closing entries in a journal d) Preparing transaction source documents e) none of the above 81. Which of these is a business reporting language often used in recording or transmitting accounting data? a) XBRL b) XFile c) ABC d) Accounting Live 82. Which of the following is not true regarding professional service firms? a) The SEC is in favor of professional service firms expanding their businesses to include consulting services b) As a result of the corporate bankruptcies and accounting scandals in 2002, professional service firms no longer perform any consulting services c) Professional service firms generally offer a variety of assurance services, including providing assurance over AISs d) In the early 2000's, many large professional service firms sold off the majority of their consulting practices 83 The principal cause for more timely performance reports in the typical modern organization is due to: a) Better educated management b) Adoption of progressive management philosophies which stress participative management (e.g., MBO) c) Information processing systems d) Need for less information TB 1.7 84. The P in the acronym KPI stands for: a) Processing b) Performance c) Planning d) Personnel e) none of these 85. For performance reports to achieve their control objectives, they must: a) Include relevant information so that necessary action may be taken to accomplish organizational goals b) Be timely so that minimal time elapses between an activity's occurrence and the feedback reflecting the activity's efficient or inefficient performance c) Provide subsystem managers with suggestions as to how they can operate their subsystems more efficiently d) all of the above e) a and b only 86. Which of the following is intended to solve the problem that financial data used in one application is not easily transferable to other applications? a) XMP b) ERP c) XBRL d) XMLP 87. "Excessive data reporting" can result in: a) Massive quantities of data printed out by a company's computer b) The generation of unnecessary reports c) Subsystem managers' belief that it is a status symbol to receive large numbers of internally generated reports d) Inefficient subsystem manager decision making due to a lack of relevant information being available e) all of the above 88. An example of an assurance service for a company engaged in electronic commerce is: a) XBRL b) Trust US c) CITP d) CPA Trust Services 89. Which of the following is not a component of the balanced scorecard? a) Customer knowledge b) Internal business processes c) Transaction processing d) Financial performance TB 1.8 90. a) b) c) d) Which of the following best describes assurance services? Auditors are desperate to offer assurance services so that they will still have business in the future Assurance and auditing are closely related Assurance is a guarantee that there is no fraud in a company There are no likely assurance services that CPAs can offer that do not require accountants to be well-trained in information technology 91. Information systems auditors are: a) Auditors who are concerned with analyzing risks associated with computerized information systems b) Individuals who often work closely with financial auditors c) Auditors who have a lot of technical expertise related to information technology d) all of the above 92. Which of these is a certification that accountants can earn that focuses on proficiency in information technology? a) CPA b) CMA c) CISA d) CITP 93. The designation for a licensed information systems audit professional is: a) CPA b) CMA c) CIA d) CISA 94. The certified information systems auditor certification is sponsored by: a) ISACA b) AICPA c) IMA d) none of these TB 1.9 Matching Questions For the following terms find the correct definition below and place the letter of that response in the blank space next to the term. Each definition is used only once there are two terms that are not used. 95. _______ 96. _______ 97. _______ 98. _______ 99. _______ 100. _______ 101. _______ 102. _______ 103. _______ 104. _______ OSC SAR CISA ERP XBR ISACA IT REA KPI SOX Definitions: A. B. C. D. E. F. G. H. I. J. K. L. A professional auditing organization Federal legislation passed in response to recent accounting scandals An enterprise-wide accounting system Federally-mandated reporting of suspicious accounting activities An important database design approach Key productivity report A standardized business reporting language similar to HTML An auditing certification An acronym often used to describe the computer department of an organization A type of knowledge worker A federal initiative to thwart terrorists intent on harming cargo transport An important performance indicator Short Answer Questions 105. Name some business activities that do not require traditional journal entries. 106. Give three reasons why XBRL formatted documents are useful. TB 1.10 ... View Full Document

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