Deck 8: Rea Modeling

Question 1

Data in a view-driven AIS are often stored in multiple places, such as:

A)Journals.
B)Ledgers.
C)Both A and B.
D)Neither A nor B.

Answer 1

C

Question 2

View-driven AIS are designed to support a particular way of looking at the data they contain. Which of the following is not a view commonly supported by a view-driven AIS?

A)Balance sheet
B)Income statement
C)Statement of shareholders' equity
D)Budget variance report

Answer 2

D

Question 3

Consider the following REA diagram as you respond to the next question: The box in the second column represents a(n):

A)Resource
B)Event
C)Internal agent
D)External agent

Answer 3

B

Question 4

Information technology controls, such as a password rotation policy, can be used in:

A)View-driven AIS.
B)Event-driven AIS.
C)Both A and B.
D)Neither A nor B.

Question 5

View-driven accounting information systems have been criticized because they:

A)Focus on a very small, well-defined group of important business events.
B)Often process data in batches.
C)Both A and B
D)Neither A nor B

Question 6

View-driven accounting information systems often foster the idea of stovepiping in organizations. Which of the following is an example of stovepiping?

A)All department heads meet to discuss company strategy.
B)A sales representative quotes a price that is less than cost.
C)Both A and B are examples of stovepiping.
D)Neither A nor B is an example of stovepiping.

Question 7

Which of the following pieces of data would you expect to find in an event-driven AIS, but not in a view-driven AIS?

A)Accounts to debit
B)Accounts to credit
C)Details about customer preferences for product color
D)All of the above

Question 8

Which of the following statements about view- and event-driven AIS is most true?

A)The two are differentiated by the presence or absence of information technology.
B)The two are differentiated by the use of paper or electronic documents.
C)Both A and B are true.
D)Neither A nor B is true.

Question 9

Consider the following REA diagram as you respond to the next question: The boxes in the third column represent a(n):

A)Resource and internal agent
B)Event and internal agent
C)Internal agent and external agent
D)Resource and external agent

Question 10

The accounting cycle comprises ten steps. In which step would you expect to find a difference between view-driven and event-driven AIS?

A)Analyze transactions.
B)Record adjusting entries.
C)Both A and B.
D)Neither A nor B

Question 11

In contrast with view-driven AIS, event-driven accounting information systems focus on:

A)Business processes.
B)Journal entries.
C)Ledger accounts.
D)All of the above.

Question 12

A company wants to prepare a schedule of assets that separates current and long-term assets, as well as reports relevant dollar amounts. Which type of AIS could the company use to prepare such a schedule?

A)View-driven
B)Event-driven
C)Either A or B
D)Neither A nor B

Question 13

An accounting information system captures data that are eventually grouped by account, and then used to prepare general purpose financial statements. The system could be described as:

A)A view-driven AIS.
B)An event-driven AIS.
C)Either A or B.
D)Neither A nor B.

Question 14

In a view-driven AIS, where you would expect to see stored data about product quality?

A)In the journal
B)In the ledger
C)Both A and B
D)Neither A nor B

Question 15

In view-driven accounting information systems, internal controls are often:

A)Protective.
B)Expensive.
C)Both A and B.
D)Neither A nor B.

Question 16

Data in a view-driven accounting information system are:

A)Highly aggregated.
B)Stored in a single place.
C)Both A and B
D)Neither A nor B

Question 17

View-driven AIS have been criticized because their data are often outdated. Which of the following journal entries for the purchase of inventory best illustrates that criticism?

A)Debit purchases, credit cash
B)Debit inventory, credit cash
C)Debit purchases, credit inventory
D)Debit inventory, credit purchases

Question 18

A journal entry in a view-driven AIS debits equipment for $10,000, credits cash for $2,000 and credits notes payable for $8,000. Which of the following pieces of data would you expect to see in an event-driven AIS but not in the view-driven AIS?

A)The transaction date
B)The expected life of the equipment
C)Both A and B
D)Neither A nor B

Question 19

Consider the following REA diagram as you respond to the next question: The numbers and symbols in parentheses in the model are called:

A)Cardinalities
B)Database construction tools
C)Internal controls
D)Relationship descriptors

Question 20

Consider the following REA diagram as you respond to the next question: The box in the first column represents a(n):

A)Resource
B)Event
C)Internal agent
D)External agent

Question 21

Consider the following short case as you respond to the next nine questions: ABC Consulting's employees include management, consultants and office staff. The company accepts engagements related to internal control design and evaluation, as well as enterprise risk management plans. A customer can purchase the two services independently of one another. The office staff bills clients on a monthly basis with terms of 2 / 10, n / 30. All consulting clients must sign a contract, which is also signed by an ABC manager. One member of ABC's management team assigns at least one consultant to work with the customer until the engagement is complete. Consultants can be assigned to multiple engagements simultaneously, but every consultant must always be working on at least one engagement. Each client may have only one contract with ABC at a time.How many agents would be depicted in the rightmost column of a REA model of the case?

A)One
B)Two
C)Three
D)More than three

Question 22

To answer the next question, consider the following partial REA model in the context of the case: ABC Consulting's employees include management, consultants and office staff. The company accepts engagements related to internal control design and evaluation, as well as enterprise risk management plans. A customer can purchase the two services independently of one another. The office staff bills clients on a monthly basis with terms of 2 / 10, n / 30. All consulting clients must sign a contract, which is also signed by an ABC manager. One member of ABC's management team assigns at least one consultant to work with the customer until the engagement is complete. Consultants can be assigned to multiple engagements simultaneously, but every consultant must always be working on at least one engagement. Each client may have only one contract with ABC at a time. If Box B is labeled "consultants," Box A could be labeled:

A)Assign employees
B)Complete engagement
C)Either A or B
D)Neither A nor B

Question 23

Consider the following short case as you respond to the next nine questions: ABC Consulting's employees include management, consultants and office staff. The company accepts engagements related to internal control design and evaluation, as well as enterprise risk management plans. A customer can purchase the two services independently of one another. The office staff bills clients on a monthly basis with terms of 2 / 10, n / 30. All consulting clients must sign a contract, which is also signed by an ABC manager. One member of ABC's management team assigns at least one consultant to work with the customer until the engagement is complete. Consultants can be assigned to multiple engagements simultaneously, but every consultant must always be working on at least one engagement. Each client may have only one contract with ABC at a time.In a REA model of the case, events would include:

A)Sign contract
B)Assign employees
C)Bill customer
D)All of the above

Question 24

When the maximum cardinalities between two elements of a REA model are many and many:

A)Create a junction table.
B)Redesign the REA model to eliminate them.
C)The REA model has errors.
D)One of the elements must be a resource.

Question 25

When the maximum cardinalities between two elements of a REA model are one and many:

A)Include the primary key from the "one side" in the table on the "many side."
B)Include the primary key from the "many side" in the table on the "one side."
C)Create a junction table.
D)The REA model has errors.

Question 26

Consider the following short case as you respond to the next nine questions: ABC Consulting's employees include management, consultants and office staff. The company accepts engagements related to internal control design and evaluation, as well as enterprise risk management plans. A customer can purchase the two services independently of one another. The office staff bills clients on a monthly basis with terms of 2/10, n /30. All consulting clients must sign a contract, which is also signed by an ABC manager. One member of ABC's management team assigns at least one consultant to work with the customer until the engagement is complete. Consultants can be assigned to multiple engagements simultaneously, but every consultant must always be working on at least one engagement. Each client may have only one contract with ABC at a time.In a REA model of the case, how many boxes would you expect to see in the second column?

A)One
B)Two
C)Three or four
D)More than four

Question 27

Which of the following statements about database tables and REA models is most true?

A)Every box in a REA model requires the creation of exactly one table.
B)Cardinalities help ensure that database tables are in third normal form.
C)Both A and B are true.
D)Neither A nor B is true.

Question 28

To answer the next question, consider the following partial REA model in the context of the case: ABC Consulting's employees include management, consultants and office staff. The company accepts engagements related to internal control design and evaluation, as well as enterprise risk management plans. A customer can purchase the two services independently of one another. The office staff bills clients on a monthly basis with terms of 2 / 10, n / 30. All consulting clients must sign a contract, which is also signed by an ABC manager. One member of ABC's management team assigns at least one consultant to work with the customer until the engagement is complete. Consultants can be assigned to multiple engagements simultaneously, but every consultant must always be working on at least one engagement. Each client may have only one contract with ABC at a time. If Box A is labeled "assign employees," Box B could be labeled:

A)Management
B)Consultants
C)Complete engagement
D)Any of the above

Question 29

Consider the following REA diagram as you respond to the next question: How many agents are represented in the model?

A)One
B)Two
C)Three
D)Four

Question 30

Consider the following short case as you respond to the next nine questions: ABC Consulting's employees include management, consultants and office staff. The company accepts engagements related to internal control design and evaluation, as well as enterprise risk management plans. A customer can purchase the two services independently of one another. The office staff bills clients on a monthly basis with terms of 2 / 10, n / 30. All consulting clients must sign a contract, which is also signed by an ABC manager. One member of ABC's management team assigns at least one consultant to work with the customer until the engagement is complete. Consultants can be assigned to multiple engagements simultaneously, but every consultant must always be working on at least one engagement. Each client may have only one contract with ABC at a time.How many external agents would be depicted in the first column of a REA model of the case?

A)Zero
B)One
C)Two
D)Three

Question 31

Consider the following REA diagram as you respond to the next question: Which of the following statements about the REA model is least true?

A)A purchase of supplies can occur with no purchasing agent involvement.
B)A purchasing agent may be involved in no purchases of supplies.
C)Exactly one purchasing agent must be involved in each purchase of supplies.
D)Purchasing agents and vendors have no relationship outside the context of a "purchase supplies" transaction.

Question 32

Which of the following is most likely to be a primary key in an "employee" table?

A)Last name
B)Employee ID number
C)Both A and B together
D)Either A or B separately

Question 33

A REA model includes "send order" as an event and "customer" as an agent. Which of the following is most true?

A)The primary key from the "send order" table should be included in the "customer" table.
B)The primary key from the "customer" table should be included in the "send order" table.
C)Both A and B
D)Neither A nor B

Question 34

Consider the following short case as you respond to the next nine questions: ABC Consulting's employees include management, consultants and office staff. The company accepts engagements related to internal control design and evaluation, as well as enterprise risk management plans. A customer can purchase the two services independently of one another. The office staff bills clients on a monthly basis with terms of 2 / 10, n / 30. All consulting clients must sign a contract, which is also signed by an ABC manager. One member of ABC's management team assigns at least one consultant to work with the customer until the engagement is complete. Consultants can be assigned to multiple engagements simultaneously, but every consultant must always be working on at least one engagement. Each client may have only one contract with ABC at a time.How many internal agents would be depicted in the third column of a REA model of the case?

A)One
B)Two
C)Three
D)More than three

Question 35

Consider the following REA diagram as you respond to the next question: Which of the following is an external agent in the model?

A)Vendor
B)Purchasing agent
C)Both A and B
D)Neither A nor B

Question 36

Enforcing ___ tells a database to update a junction table whenever separate tables are updated.

A)Internal control
B)Referential integrity
C)The accounting cycle
D)Expectancy theory

Question 37

Consider the following short case as you respond to the next nine questions: ABC Consulting's employees include management, consultants and office staff. The company accepts engagements related to internal control design and evaluation, as well as enterprise risk management plans. A customer can purchase the two services independently of one another. The office staff bills clients on a monthly basis with terms of 2 / 10, n / 30. All consulting clients must sign a contract, which is also signed by an ABC manager. One member of ABC's management team assigns at least one consultant to work with the customer until the engagement is complete. Consultants can be assigned to multiple engagements simultaneously, but every consultant must always be working on at least one engagement. Each client may have only one contract with ABC at a time.A REA model of the case would include ___ resources.

A)Zero
B)One or two
C)Three or four
D)More than four

Question 38

Consider the following short case as you respond to the next nine questions: ABC Consulting's employees include management, consultants and office staff. The company accepts engagements related to internal control design and evaluation, as well as enterprise risk management plans. A customer can purchase the two services independently of one another. The office staff bills clients on a monthly basis with terms of 2 / 10, n / 30. All consulting clients must sign a contract, which is also signed by an ABC manager. One member of ABC's management team assigns at least one consultant to work with the customer until the engagement is complete. Consultants can be assigned to multiple engagements simultaneously, but every consultant must always be working on at least one engagement. Each client may have only one contract with ABC at a time.In a REA model of the case, the cardinalities between the "assign employees" event and the agent "employees" would be:

A)Assign employees (0,*) --- (1,1)Employees
B)Assign employees (0,*) --- (1,*)Employees
C)Assign employees (1,*) --- (1,*)Employees
D)None of the above

Question 39

Which of the following is likely to require at least one junction table if present in a REA model?

A)Purchasing goods from suppliers
B)Sending an order to a supplier
C)Both A and B
D)Neither A nor B

Question 40

Consider the following REA diagram as you respond to the next question: Which of the following is an internal agent in the model?

A)Vendor
B)Purchasing agent
C)Both A and B
D)Neither A nor B

Question 41

Based on the principles of normalization, an inventory table would include all of the following fields except:

A)Transaction number
B)Item code
C)Description
D)Beginning quantity on hand

Question 42

Consider the following REA model as you answer the next question: The "employee" table is likely to include all of the following fields except:

A)Department
B)Gender
C)Last name
D)Age

Question 43

Consider the following REA model as you answer the next question: A field labeled "inventory ID" is likely to appear in which of the following tables: (i) inventory table, (ii) purchase inventory table, (iii) inventory / purchase inventory table.

A)I and II only
B)I and III only
C)II and III only
D)I, II and III

Question 44

Fill in the blanks below based on the weaknesses of view-driven AIS described in the text. a. They focus on a very small, well-defined group of important ___. b. They often process data in ___, frequently at the ___. c. The data in a view-driven AIS are often ___ because of when they are processed. d. The system captures a very limited set of data: ___, ___ and ___. e. Data in a view-driven system are highly ___ and stored in ___. f. In view-driven systems, the ___ process is often protective and expensive.
A. business eventsb. batches, end of the monthc. outdatedd. dates, accounts, amountse. aggregated, multiple placesf. internal control

Question 45

Consider the following REA model as you answer the next question: How many database tables will be required by the preceding REA model?

A)Four
B)Five
C)Six
D)Some other number

Question 46

Consider the following REA model as you answer the next question: How many junction tables will be required by the preceding REA model?

A)Two
B)Three
C)Four
D)Some other number

Question 47

Determine whether each of the following items applies to:
(a) view-driven systems only,
(b) event-driven systems only,
(c) both view- and event-driven systems or
(d) neither view- nor event-driven systems.
1) Capable of generating a balance sheet
2) Captures a more comprehensive data set
3) Comprises five basic parts
4) Converts information into decisions
5) Incorporates data that may not be presented in the general purpose financial statements
6) Must use information technology
7) Records transactions using the principles of debit and credit
8) Should be designed with the FASB Conceptual Framework in mind
9) Transforms data into information
10) Typically incorporates journals and ledgers

Question 48

Based on a REA model, an accountant created an inventory table, a purchase inventory table and a purchases / inventory table. Several field names that might appear in those tables are listed below. Organize them into the appropriate tables based on the principles of database normalization. Specify primary keys with underlines and foreign keys with brackets. Some of the field names may be used in more than one table; others may not be used at all. "As of" date for beginning inventory
Beginning quantity on hand
Cost per unit of beginning inventory
Inventory description
Inventory item number
Number of units purchased
Price per unit purchased
Purchasing agent ID
Total cost of inventory on hand
Total cost of inventory purchases
Transaction date
Transaction number
Vendor ID

Question 49

Consider the following REA model as you answer the next question: A field labeled "transaction ID" is likely to appear in which of the following tables based on the REA model above?

A)Purchase inventory table
B)Inventory / purchase inventory table
C)Both A and B
D)Neither A nor B

Question 50

Consider the following REA model as you answer the next question: Which of the following tables is indicated by the preceding REA model:

A)Supplier / employee table
B)Supplier / purchase inventory table
C)Employee / purchase inventory table
D)Inventory / purchase inventory table

Question 51

Prepare a narrative description of the business process illustrated in the REA model below.

Question 52

Fill in the blanks below based on the principles of REA modeling.
A. ___ events focus on activities involved with providing goods and services to customers.
B. ___ events deal with recording and maintaining data.
C. ___ events are concerned with human decision making.
D. The leftmost column in a REA model presents ___.
E. The middle column in a REA model presents ___.
F. The rightmost column in a REA model presents ___.
G. ___ tell an accounting professional about the relationships between elements of a REA model.
A. Operatingb. Informationc. Decision / managementd. resourcese. eventsf. agentsg. Cardinalities

Question 53

Consider the following REA model as you answer the next question: The "employee" table is likely to include which of the following fields: (i) department, (ii) gender.

A)I only
B)II only
C)Both I and II
D)Neither I nor II

Question 54

Consider the following REA model as you answer the next question: Which of the following would be foreign keys in the "purchase inventory" table?

A)Supplier ID
B)Employee ID
C)Both A and B
D)Neither A nor B

Question 55

The Association of Certified Fraud Examiners offers one- and two-day seminars to its members throughout the year; members find out about the seminars via the association's web site or a catalog mailed on a quarterly basis. Each seminar must have at least ten registrants, but can have no more than thirty registrants.The ACFE maintains registrant records independently of each seminar since a registrant may be involved in multiple seminars over time. Association staff process seminar registrations, which may come in through the mail, over the phone or via the web site. Payment must be made in advance in one or more installments; the association does not refund registration fees for "no-shows." Each seminar has a single speaker who is paid a fixed fee regardless of the number of attendees; the speaker's fee is paid at the end of the seminar. A speaker may present the same seminar multiple times during the year, but each speaker is focused on a single seminar topic. At the end of each seminar, attendees receive a signed certificate of completion after they respond to a short quiz based on the seminar's content. Create a REA model for the registration and collection process.

Question 56

Consider the following REA model as you answer the next question: Based on the preceding REA model, which of the following statements is most true?

A)The inventory table will not have a foreign key.
B)The primary key from the "purchase inventory" table will appear in the supplier table.
C)The primary key from the "purchase inventory" table will appear in the employee table.
D)All of the above statements are true.

Question 57

Create cardinalities for each of the following independent situations. Format the cardinalities as they would appear in a REA model.
A. A customer may purchase inventory multiple times; every inventory purchase is tied to a single customer.
B. A "purchase inventory" transaction may involve multiple inventory items; an individual inventory item may be sold many times or not at all.
C. Each inventory purchase is authorized by a single purchasing agent; the number of authorizations for each purchasing agent can be as few as one, but has no upper limit.
D. A bank deposit is processed by a single teller; a teller can process an unlimited number of deposits, but must process at least one each day.
F. An individual "process bank deposit" transaction may involve multiple checks; an individual check can be deposited only one time.

Question 58

In your own words, explain the steps used to create a REA model.

Question 59

The Association of Certified Fraud Examiners offers one- and two-day seminars to its members throughout the year; members find out about the seminars via the association's web site or a catalog mailed on a quarterly basis. Each seminar must have at least ten registrants, but can have no more than thirty registrants. Association staff process seminar registrations, which may come in through the mail, over the phone or via the web site. Payment must be made in advance; the association does not refund registration fees for "no-shows." Each seminar has a single speaker who is paid a fixed fee regardless of the number of attendees; the speaker's fee is paid at the end of the seminar. A speaker may present the same seminar multiple times during the year, but each speaker is focused on a single seminar topic. At the end of each seminar, attendees receive a signed certificate of completion after they respond to a short quiz based on the seminar's content.Create database specifications (table and field names) for the registration and collection process. Indicate primary keys by underlining and foreign keys with brackets.

Question 60

Most AIS designers and auditors find it best to start a REA model by identifying events, which come in three broad categories: operating, information and decision / management. Which category best describes each item below?
A. Buying supplies
b. Deciding how to document an AIS
c. Designing internal controls
d. Developing a risk management plan
e. Issuing capital stock
f. Motivating employees
g. Posting transactions to the ledger
h. Purchasing advertising
i. Recording transactions in a journal
j. Selling equipment

Question 61

Analyze the REA model below. Identify and describe (in narrative form) the tables you would create based on the model; do not describe the tables by listing the field names.

Question 62

REA models often are created using the six-step process described in the text; after they are created, they are often used to create database tables. List and discuss three internal controls you would recommend implementing in the six-step process and / or the database creation process.