Chapter 1

Question 1

1. Information is a business resource.

Answer 1

T

Question 2

2. An information system is an example of a natural system.

Answer 2

F. It is a manmade system therefore it is an artificial system

Question 3

3. Transaction processing systems convert non-financial transactions into financial transactions.

Answer 3

F. TPS converts economic events into financial transactions which are then recorded in journals and ledgers and the generalized information are then distributed to relevant employees to aid daily operations.

Question 4

4. Information lacking reliability may still have value.

Answer 4

F.The information that should only be kept by entities are information that are trustworthy and reliable and it should be relevant and it provides efficiency.

Question 5

5. A balance sheet prepared in conformity with GAAP is an example of discretionary reporting.

Answer 5

F. A balance sheet is a part of the FRS of a company. This type of reporting is non-discretionary since the entities are obliged to report certain information and they don’t have the option to choose what to report and how to report it.

Question 6

6. The Management Reporting System provides the internal financial information needed to manage a business.

Answer 6

T. MRS is contrary to FRS wherein it is tailored to the needs of internal users or the company’s management to run a company and help attain the goals of the business.

Question 7

7. Most of the inputs to the General Ledger System come from the Financial Reporting System.

Answer 7

F. The inputs of the GLS are from the transaction cycles.

Question 8

8. When preparing discretionary reports, organizations can choose what information to report and how to present it.

Answer 8

T. Discretionary reports like MRS are reports wherein organizations are allowed to choose what information to present to its users which is the management and the means and approach to report it.

Question 9

9. Retrieval is the task of permanently removing obsolete or redundant records from the database.

Answer 9

F. Retrieval is locating and extracting an existing file or record from a database for processing. The correct answer is deletion which is the task of permanently removing obsolete or redundant records from the database.

Question 10

0. Systems development represents 80 to 90 percent of the total cost of a computer system.

Answer 10

F. The system maintenance represents 80-90% of the total cost over the course of the system’s life. It is because that development of the system constitutes only a small part of a system’s life, when the generation is done the maintenance will start to take place.

Question 11

11. The database administrator is responsible for the security and integrity of the database.

Answer 11

T. It is the database administrator’s job to protect the security and integrity of a database since the database contains all data and information that is relevant for the operation of the business and maintain the confidence of its external users. It contains the fuel of the company, if there would be security breach or when the integrity of the data is destroyed, that would put the company in a great risk.

Question 12

12. A backbone system is completely finished, tested, and ready for implementation.

Answer 12

F. Tunkey systems are completely finished and tested systems and are ready for implementation. Meanwhile, a backbone system provides a basic system structure on which to build.

Question 13

13. The internal auditor represents the interests of third-party outsiders.

Answer 13

F. The external auditor represents the interests of third-party outsiders that will use a company’s financial information. This also ensures that the information that company’s reporting is not biased and it is trustworthy.

Question 14

4. Information Technology (IT) audits can be performed by both internal and external auditors.

Answer 14

T. An IT auditing software like GAS allows any auditor to access electronically coded data files and perform various operations on their contents.

Question 15

15. The single largest user of computer services is the personnel function.

Answer 15

F. In most organizations, the accounting function is the single larges user of IT. All IT systems that process financial transactions impact the accounting function in some way. As the end users of this function, the accountants need to specify all the important features to the IT professional who designs the system.

Question 16

6. Increased control is one of the key advantages of distributed data processing.

Answer 16

F. Increased control carries IT control p

Question 17

17. The flat-file approach is most often associated with so-called legacy systems.

Answer 17

The flat-file approach is most often associated with so-called legacy systems. These are large main frame systems that were implemented in the late 1960s through the 1980s. Organizations today still use these systems extensively. Eventually, modern database management systems will replace them, but in the meantime accountants must continue to deal with legacy system technologies.

Question 18

18. In a flat-file system, files are easily shared by users.

Answer 18

F. Files are easily shared by users in a database approach since the data are pooled into a common database that is shared by all the users. In a flatfile approach, individual users own their data files.

Question 19

19. Legacy systems were eliminated in the effort to make systems Y2K compliant.

Answer 19

F. A lot of people assumed that legacy systems would come to an end. But instead, corporate America invested billions of dollars in making these systems Y2K compliant. Legacy systems are still present today since they add value for their users, and they will not be replaced until they stop to add value.

Question 20

20. One of the greatest disadvantages of database systems is that all data is always available to all users.

Answer 20

F. I think this feature is not a disadvantage rather it is somehow an advantage that all data can be easily access by all users especially when the data is needed as soon as possible. However, certain risks are still present. Some may use this data in a negative way.

Question 21

21. Under SOX legislation public accounting firms are no longer allowed to provide consulting services to audit clients.

Answer 21

T. The SOX act does not allow public accounting firms to provide consulting services to audit clients to decrease if not to eliminate corporate accounting scandals. It was made after the Enron Scandal. This law protect investors and other third party users by improving the accuracy and reliability in the financial statements and other documents provided by firms.

Question 22

Under SOX legislation public accounting firms are no longer allowed to provide consulting services to their clients

Answer 22

F NOTE: They may not provide such services to audit clients, but may still provide them to non-audit clients

Question 23

1. Which of the following is not a business resource? a. raw material b. labor c. information d. all are business resources

Answer 23

D

Question 24

Which level of management is responsible for short-term planning and coordination of activities necessary to accomplish organizational objectives?

a. operations management
b. middle management c. top management
d. line management

Answer 24

C.

Question 25

4. The ability to achieve the goals of a system depends upon the effective functioning and harmonious interaction between its subsystems. This is called a. system decomposition b. system redundancy c. backup system d. subsystem interdependency

Answer 25

D

Question 26

. The value of information for users is determined by all of the following but a. reliability . b. relevance c. convenience d. completeness

Answer 26

C

Question 27

6. An example of a nonfinancial transaction is a. sale of products b. cash disbursement c. log of customer calls d. purchase of inventor

Answer 27

B

Question 28

7. An example of a financial transaction is a. the purchase of computer b. a suppliers price list c. a delivery schedule d. an employee benefit brochure

Answer 28

A

Question 29

8. Which subsystem is not part of the Accounting Information System? a. Transaction Processing System b. Expert System c. General Ledger/Financial Reporting System d. Management Reporting System

Answer 29

B

Question 30

9. The major difference between the Financial Reporting System (FRS) and the Management Reporting System (MRS) is the a. FRS provides information to internal and external users; the MRS provides information to internal users b. FRS provides discretionary information; the MRS provides nondiscretionary information c. FRS reports are prepared using information provided by the General Ledger System; the MRS provides information to the General Ledger System d. FRS reports are prepared in flexible, nonstandardized formats; the MRS reports are pre-

Answer 30

A

Question 31

10. The purpose of the Transaction Processing System includes all of the following except a. converting economic events into financial transactions b. recording financial transactions in the accounting records c. distributing essential information to operations personnel to support their daily operations d. measuring and reporting the status of financial resources and the changes in those resources

Answer 31

D

Question 32

11. The Transaction Processing System includes all of the following cycles except a. the revenue cycle b. the administrative cycle c. the expenditure cycle d. the conversion cycle

Answer 32

B

Question 33

12. The primary input to the Transaction Processing System is a. a financial transaction b. an accounting record c. an accounting report d. a nonfinancial transaction

Answer 33

A

Question 34

13. When designing the data collection activity, which type of data should be avoided? a. data that is relevant b. data that is efficient c. data that is redundant d. data that is accurate

Answer 34

C

Question 35

14. The most basic element of useful data in the database is . a. the record b. the key c. the file d. the attribute

Answer 35

D

Question 36

15. In a database, a complete set of attributes for a single occurrence of an entity class is called a. a key b. a file c. a record d. a character

Answer 36

C

Question 37

16. Effective information has all of the following characteristics except a. relevance b. completeness c. summarization d. structure

Answer 37

D

Question 38

17. Database management tasks do not include a. summarization b. storage c. retrieval d. deletion

Answer 38

A

Question 39

18. The author distinguishes between the Accounting Information System and the management Information System based on a. whether the transactions are financial or nonfinancial b. whether discretionary or nondiscretionary reports are prepared c. the end users of the reports d. the organizational structure of the business ,

Answer 39

A

Question 40

19. Which activity is not part of the finance function? a. cash receipts b. portfolio management c. credit d. general ledge

Answer 40

D

Question 41

20. Market research and advertising are part of which business function? a. materials management b. finance c. marketing d. production

Answer 41

C

Question 42

21. Which function manages the financial resources of the firm through portfolio management, banking, credit evaluation, and cash receipts and disbursements? a. accounting b. finance c. materials management d. distribution

Answer 42

B

Question 43

22. Which of the following is not part of the accounting function? a. managing the financial information resource of the firm b. capturing and recording transactions in the database c. distributing transaction information to operations personnel d. managing the physical information system of the firm

Answer 43

D

Question 44

23. The term accounting independence refers to a. data integrity b. separation of duties, such as record keeping and custody of physical resources c. generation of accurate and timely information d. business segmentation by function

Answer 44

B

Question 45

24. In the distributed data processing approach a. computer services are consolidated and managed as a shared organization resource b. the computer service function is a cost center c. the end users are billed using a charge-back system d. computer services are organized into small information processing units under the control of end user

Answer 45

D

Question 46

25. The data control group is responsible for a. performing the day-to-day processing of transactions b. security and integrity of the database c. liaison between the end user and data processing d. providing safe storage for off-line data files

Answer 46

C

Question 47

26. Data processing does not involve a. data control b. computer operations c. system maintenance d. data conversion

Answer 47

C

Question 48

27. Attestation services are performed by a. external auditors b. internal accountants c. internal auditors d. third-party accountants

Answer 48

D

Question 49

29. The objectives of all information systems include all of the following except a. support for the stewardship function of management b. evaluating transaction data c. support for the day-to-day operations of the firm d. support for management decision making ,

Answer 49

B

Question 50

30. Which individuals may be involved in the Systems Development Life Cycle? a. accountants b. systems professionals c. end users d. all of the above

Answer 50

D

Question 51

31. An appraisal function housed within the organization that performs a wide range of services for management is a. internal auditing b. data control group c. external auditing d. database administration

Answer 51

A

Question 52

32. Advantages of a database system include all of the following except a. elimination of data redundancy b. open access to all data by all users c. single update for changes in data d. confidence that all data is curren

Answer 52

B

Question 53

33. Disadvantages of distributed data processing include all of the following except a. mismanagement of organization-wide resources b. hardware and software incompatibility c. cost reductions d. difficulty in hiring qualified IT professionals

Answer 53

C

Question 54

34. Advantages of distributed data processing include each of the following except a. cost reductions b. better management of organization resources c. improved operational efficiency d. increased user satisfaction

Answer 54

B

Question 55

35. Disadvantages of the distributed data processing approach include all of the following except a. possible mismanagement of organization resources b. redundancy of tasks c. software incompatibility d. system is not responsive to the users situation , Chapter

Answer 55

D

Question 56

36. ERP packages include all of the following modules except a. human resources b. general ledger c. inventory management d. they include all of the above

Answer 56

D

Question 57

7. All of the following are external end users except a. cost accountants b. creditors c. stockholders d. tax authorities

Answer 57

A

Question 58

38. Useful information must possess all of the following characteristics except a. relevance b. precision c. accuracy d. completeness

Answer 58

B

Question 59

39. The objectives of an information system include each of the following except a. support for the stewardship responsibilities of management b. furthering the financial interests of shareholders c. support for management decision making d. support for the firms day-to-day operations

Answer 59

B

Question 60

40. Accountants play many roles relating to the accounting information system, including all of the following except a. system users b. system designers c. system auditors d. system converter

Answer 60

D