Deck 1: The Information System: an Accountants Perspective

Question 1

The objectives of the data collection activity of the general model for accounting information systems are to collect data that are

A) relevant and redundant.
B) efficient and objective.
C) efficient and redundant.
D) efficient and relevant.

Answer 1

The objective of the data collection activity
Efficient and relevant means collection of data which is cost effective and important. Collecting of data which is cost effective and suitable and also serves as a relevant record. Thus, the objective of the data collection activity of the general model for accounting information system is to collect data which is efficient and relevant.
Therefore, the correct option is'd'.
Explanation of incorrect options:
Relevant and redundant means that having some bearing connection with the particular data or process and redundant means saving the duplicate data in two different places, data must be effective. Therefore, option 'a' is not correct.
Efficient and objective means collection of data which is cost effective and based on some facts and figures as data collected must be relevant, therefore, option 'b' is not correct.
Efficient and redundant means assembling of data which is cost effective and serves as a duplicate record in case a failure in the system occurs, but data must be relevant. Therefore, option'c' is also not correct.

Question 2

Which is NOT a source of evidence for an external auditor?

A) work performed by internal auditors who organizationally report to the controller
B) tests of controls
C) substantive tests
D) work performed by internal auditors who report to the audit committee of the BOD

Answer 2

Not a source of evidence for an external auditor
For source of evidence, the external auditor has to depend on the evidence provided by the internal auditor which is in the form of information that is organizationally independent. After gathering the information, the internal auditor reports it to the BOD (board of directors) of the audit committee.
Therefore, the correct option is a.
Explanation of incorrect options:
A test of controls is a source of evidence for an external auditor which focuses on the system itself.
Therefore, option 'b' is not correct.
A substantive test is a source of evidence for an external which focuses on data instead of the process.
Therefore, option 'c' is not correct.
For source of evidence, external auditor depends on the evidence provided by the internal auditor in the form of information which is organizationally independent. After gathering the information the internal auditor reports to the BOD (board of directors) of the audit committee.
Therefore, option 'd' is not correct.

Question 3

Which of the following best describes the activities of the accounting function?

A) inventory control, accounts payable, fixed assets, and payroll
B) fixed assets, accounts payable, cash disbursements, and cost accounting
C) purchasing, cash receipts, accounts payable, cash disbursements, and payroll
D) inventory control, cash receipts, accounts payable, cash disbursements, and payroll
E) inventory control, cost accounting, accounts payable, cash disbursements, and payroll

Answer 3

Correct option is a.
Justification:
Activities of the accounting function: Accounting function is the process to manage information related to the financial resources of the firm. And this process includes two important functions of recording the financial effects related to the economic events in processing of the transaction and gathering the transaction information related to the operation personnel to coordinate the key tasks.
There are some of the accounting functions which contribute directly to operations related to the business. These functions are cost accounting, inventory control, account payable, payroll accounts, account receivable, fixed assets accounting, billing and the general ledger. Therefore, the correct option is a.
Explanation of incorrect options:
• Since, cash disbursements do not comes in the activity of the accounting. Therefore option 'b' is not the correct option.
• Since, cash disbursements and cash receipts do not come in the activity of the accounting. Therefore, option 'c' is not the correct option.
• According to the definition mentioned above, cash disbursements and cash receipts does not come in the activity of the accounting. Therefore, option 'd' is not the correct option.
• Since, cash disbursements do not comes in the activity of the accounting. Therefore, option 'e' is not the correct option.

Question 4

What is an external financial audit, and what are the sources of audit evidence?

Question 5

Why are custom systems more expensive than commercial systems?

Question 6

INFORMATION SYSTEM CATEGORIZATION
Classify the following items as either:
TPS-transaction processing system
FRS-financial reporting system
MRS-management reporting system
a. Variance reports
b. Sales order capture
c. Balance sheet
d. Budgets
e. Purchase order preparation
f. Tax returns
g. Sales summary by product line
h. Cash disbursements preparation
i. Annual report preparation
j. Invoice preparation
k. Cost-volume-profit analysis

Question 7

COMMUNICATIONS
Before the mid-1970s, systems programmers and businesspeople (including accountants) did not communicate well with one another. The programmers were criticized for using too much jargon, and the businesspeople were criticized for not adequately expressing their needs. Efforts have been made to overcome this communication gap, but room for improvement still exists. What problems do you think may result from this communication gap? What can you do to help further close the gap when you enter the workforce?

Question 8

What does stewardship mean, and what is its role in an information system?

Question 9

What is an ERP system?

Question 10

What types of companies are potential customers for commercial software?

Question 11

What are the three cycles of transaction processing systems?

Question 12

What are the levels of data hierarchy?

Question 13

Discuss how conceptual and physical systems differ and which functions are responsible for each of these systems.

Question 14

Why do firms outsource their IT functions? Explain the options of traditional IT outsourcing and cloud computing, and how they differ.

Question 15

Briefly explain accounting independence.

Question 16

Discuss the differences between internal and external users of information and their needs and demands on an information system. Historically, which type of user has the firm catered to most?

Question 17

Do you think transaction processing systems differ significantly between service and manufacturing industries? Are they equally important to both sectors?

Question 18

Discuss what is meant by the statement, "The accounting system is a conceptual flow of information that represents physical personnel, machinery, and flows of raw materials and cash through the organization."

Question 19

Which statement about cloud computing is most true?

A) Cloud computing involves long-term contracts.
B) Cloud computing is location-independent computing.
C) Cloud computing involves an organization selling its IT resources to a vendor and leasing back IT services from the vendor.
D) Cloud computing involves fixed price contracts.
E) Cloud computing involves signing entering into multiple contracts with each IP service provider to create a cloud of resources.

Question 20

What two roles are played by accountants with respect to the information system?

Question 21

Why do systems designers need to know anything about auditing?

Question 22

Which of the following is NOT a financial transaction?

A) purchase of products
B) cash receipts
C) update valid vendor file
D) sale of inventory

Question 23

Which of the following is NOT a characteristic of effective information?

A) relevance
B) accuracy
C) summarization
D) precision

Question 24

Which of the following is NOT an objective of all information systems?

A) support for the stewardship function of management
B) support for management decision making
C) support for the day-to-day operations of the firm
D) all of the above are objectives

Question 25

List five functional areas and their sub-functions.

Question 26

Define the term attest function.

Question 27

USERS OF INFORMATION
Classify the following users of information as either:
I-internal user
T-external user: trading partner
S-external user: stakeholder
a. Internal Revenue Service
b. Inventory control manager
c. Board of directors
d. Customers
e. Lending institutions
f. Securities and Exchange Commission
g. Stockholders
h. Chief executive officer
i. Suppliers
j. Bondholders

Question 28

ORGANIZATION FUNCTIONS Based on Figure 1-6 in the text, draw a diagram of functional segments for an oil company that has the following operations:
a. A head office in New York City responsible for international and national marketing, acquisition of leases and contracts, and corporate reporting.
b. Two autonomous regional facilities in Tulsa, Oklahoma, and New Orleans, Louisiana. These facilities are responsible for oil exploration, drilling, refining, storage, and the distribution of petroleum products to corporate service stations throughout the country and abroad.

Question 29

CHARACTERISTICS OF USEFUL
INFORMATION
All records in a file must be uniquely identifiable in at least one attribute, which is its primary key. Drawing on your general knowledge of accounting, identify the primary key for the following types of accounting records. To illustrate, the first record is done for you.

Question 30

Why is an active board of directors audit committee important to an organization?

Question 31

Define the term financial services.

Question 32

What are the four levels of activity in the pyramid representing the business organization? Distinguish between horizontal and vertical flows of information.

Question 33

What is discretionary reporting?

Question 34

What are the three fundamental tasks of database management?

Question 35

Which of the following statements is most accurate?

A) ERP systems are commercial software packages that are sometimes called turnkey systems because they can be implemented by the user with little or no modification.
B) Substantive tests provide evidence focused on the system controls.
C) Public accounting firms that provide attest services are not allowed under SOX to offer IT advisory services.
D) Both small and large firms that have standardized information needs are potential customers for commercial software.
E) External auditors may rely on the work of internal auditors only if they report to the controller or the CEO of the client company.

Question 36

What is IT auditing?

Question 37

Comment on the level of detail necessary for operations management, middle management, and stockholders.

Question 38

Discuss the difference between the financial reporting system and general ledger system.

Question 39

Discuss the importance of accounting independence in accounting information systems. Give an example of where this concept is important (use an example other than inventory control).

Question 40

Distinguish the roles of internal and external auditors.

Question 41

Distinguish between conceptual and physical systems.

Question 42

The following are subsystems of the accounting information system, EXCEPT the

A) transaction processing system.
B) human resources system.
C) general ledger/financial reporting system.
D) management reporting system.

Question 43

Which of the following is NOT a database management task?

A) retrieval
B) storage
C) summarization
D) deletion

Question 44

Which of the following best describes the activities of the materials management function?

A) purchasing, receiving, and inventory control
B) receiving, sales, distribution, and purchasing
C) receiving, storage, purchasing, and accounts payable
D) purchasing, receiving, and storage
E) purchasing, storage, and distribution

Question 45

Do you agree with the statement, "The term IT auditor should be considered obsolete because it implies a distinction between regular auditors and auditors who examine computerized AIS''? Why or why not?

Question 46

What is the role of the audit committee of the board of directors?

Question 47

ACCOUNTING INFORMATION SYSTEM MODEL
Examine the diagram below and determine what essential mechanism is missing. Once you have identified the missing element, discuss its importance.

Question 48

ORGANIZATION FUNCTIONS
Based on Figure 1-6 in the text, draw a diagram of functional segments for a manufacturer of diversified products. The general characteristics of the firm are as follows:
a. The organization produces three unrelated products: lawn and garden furniture for sale in home improvement centers and department stores, plastic packaging products for the electronics and medical supply industries, and paper products (e.g., plates, cups, and napkins) for the fast-food industry.
b. Although the manufacturing facilities are located within a single complex, none of the three products shares the same suppliers, customers, or physical production lines.
c. The organization's functional activities include design, production, distribution, marketing, finance, human resources, and accounting.

Question 49

DATA ATTRIBUTES
Drawing from your basic accounting knowledge, list the relevant data attributes that constitute the record types below. Identify which attribute is the primary key for the record.
Accounts Payable record
Inventory record
Customer Sales Orders record
Purchase Orders to vendors
Cash Receipts (checks) from customers
Employee Payroll Earnings records

Question 50

What is the role of a database administrator?

Question 51

Who initiates a fraud audit within the organization?

Question 52

What is the relationship among data, information, and an information system?

Question 53

What are the characteristics of good or useful information?

Question 54

What is feedback, and how is it useful in an information system?

Question 55

Describe cloud computing and explain how it is similar to obtaining a commodity product.

Question 56

When can external auditors rely on the work performed by internal auditors?

Question 57

Distinguish between financial and nonfinancial transactions. Give three examples of each.

Question 58

Examine Figure 1-4 and discuss where and how problems can arise that can cause the resulting information to be bad or ineffective.

Question 59

Discuss why it is crucial that internal auditors report solely to the audit committee of the board of directors and answer to no other group.

Question 60

What is the role of the accounting function in an organization?

Question 61

Name the tests that auditors perform to gather evidence.

Question 62

Which of the following is NOT a purpose of the transaction processing system?

A) managing and reporting on the status of financial investments
B) converting economic events into financial transactions
C) distributing essential information to operations personnel to support their daily operations
D) recording financial transactions in the accounting records

Question 63

When viewed from the highest to most elemental level, the data hierarchy is

A) attribute, record, file.
B) record, attribute, key.
C) file, record, attribute.
D) file, record, key.
E) key, record, file.

Question 64

Which of the following best describes the activities of the production function?

A) maintenance, inventory control, and production planning
B) production planning, quality control, manufacturing, and cost accounting
C) quality control, production planning, manufacturing, and payroll
D) maintenance, production planning, storage, and quality control
E) manufacturing, quality control, and maintenance

Question 65

Why is it important to organizationally separate the accounting function from other functions of the organization?

Question 66

What characteristic conceptually distinguishes internal and external auditing?

Question 67

ACCOUNTING INFORMATION SYSTEM MANAGEMENT INFORMATION SYSTEM FEATURES
List some AIS and MIS information from which salespeople may benefit. Clearly indicate whether the information item would be an output of a traditional AIS or MIS system. Finally, discuss the benefits of integrating this information.

Question 68

FUNCTIONAL SEGMENTATION
The current organizational structure of Blue Sky Company, a manufacturer of small sailboats, is presented below.
Required
a. What operational problems (e.g., inefficiency, errors, or fraud) do you think Blue Sky could experience because of this structure?
b. Draw a new diagram reflecting an improved structure that solves the problems you identified. If necessary, you may add up to two new positions.

Question 69

DISTRIBUTED DATA PROCESSING
Explain why an organization would choose to install a distributed instead of a centralized computer environment.

Question 70

Distinguish between the centralized and distributed approaches to organizing the IT function.

Question 71

What is the role of network administration?

Question 72

Distinguish between AIS and MIS.

Question 73

What rules govern data collection?

Question 74

What are the fundamental objectives of all information systems?

Question 75

Question 76

What is cloud computing?

Question 77

An information system must meet three fundamental objectives. Discuss why these objectives cannot effectively be met by a common set of information.

Question 78

Discuss how the elements of efficiency, effectiveness, and flexibility are crucial to the design of an information system.

Question 79

Contrast centralized data processing with distributed data processing. How do the roles of end users differ between the two approaches?

Question 80

What is distributed data processing?