Acctg433 Exam 2

Choose from the following list who is the primary user of user documentation. (8) A. End Users B. Programmers C. Developers D. Computer operators

A

Complete the following sentence. "To capture the detailed complexities of a process, there are _____ different levels to a DFD diagram. (8) A. 3 B. 4 C. 5 D. 2

A

Documentation is used to create, capture, evaluate, and audit processes in the AIS. When an area of business is well documented, companies benefit through standardized process transfer. Which of the following best defines standardized processes? (8) A. Similar processes throughout the company are performed consistently. B. Internal and external auditors need detailed information to understand an area of the business they are auditing. C. Documentation empowers thorough reviews of a department and can point directly to areas where efficiencies can be gained. D. New employees can quickly familiarize themselves with the department's work and processes.

A

Flowchart _____ are delineate the responsibilities for all activities involved in a business process. A. Swim lanes B. Swim courses. C. Race Lanes D. Process Lanes

A

How can a flowchart help with evaluation of controls? (8) A. Identify control weaknesses. B. Identify decision points. C. Identify process improvements. D. Identify project plans.

A

How can documentation benefit employees? (8) A. By helping them understand what to do when faced with uncertainties or problems. B. By increasing the time necessary to perform a task. C. By providing minimal information of the systems used. D. By creating the need for additional oversight from management.

A

How do organizational charts help an organization. (8) A. They depict reporting relationships. B. They define process detail. C. They quickly transform data into information. D. They describe relationships in detail.

A

In order for documentation to provide benefits to your company, you must know which form of documentation to use. Which of the following best defines documenting processes and systems? (8) A. Documenting processes and systems can be documented with a narrative description or a more complex flowchart, which can be costly to build and maintain. B. Documenting processes and systems captures the people who work there or the state of its operational and internal controls. C. Documenting processes and systems creates programs used for moving data into and out of the database. D. Documenting processes and systems creates documentation that captures both the movement of data within the system and how the data is stored in the database.

A

You are a purchasing manager, and a college intern has been hired in your department. What statement is correct when discussing source documents in the inventory purchasing process? (10) A. A purchase requisition should be created before a purchase order is made. A receiving report should accompany the delivery. B. An order request should be created before a purchase requisition is made. The purchase requisition should be sent to the vendor. C. A purchase requisition should be created before.

A

This department(BLANK) employees enter vendor invoices into the system upon receipt.

Accounts Payable

-is the theft of corporate assets, including cash, inventory, fixed assets, and intellectual property. -can impact a company's financial statements—specifically when the perpetrator creates fraudulent journal entries toconceal the theft

Asset misappropriation

Bid rigging and kickbacks create unfair and uncompetitive bidding processes which may result in financial losses due to paying higher prices in the absence of competition. Choose the best control activity to address this risk. A. Have a pre-selection of approved vendors who can bid. The control owner is the CFO. B. Require bidders to sign and submit non-collusion affidavits stating the bidder has not colluded with employees or other bidders. C. Have a pre-selection of approved vendors who can

B

Capitalizing items that are not fixed assets may result in inflated net income and assets, financial statement misstatements, fines, and penalties, or repetitional damage. Choose the best control activity to address this risk. A. Ensure regular management review of fixed asset accounting transactions and trends in fixed asset ratios. The control owner is the internal auditor. B. Ensure regular management review of fixed asset accounting transactions and trends in fixed asset ratios. The contro

B

Choose from the list below the best control activity to prevent accepting goods that were not ordered. A. Three-way matching of requisition, purchase order, and vendor invoice prior to payment. B. Three-way matching of purchase order, receiving report, and vendor invoice prior to payment. C. Three way matching of requisition, receiving report, and vendor invoice prior to payment. D. Restrict physical access to the receiving department.

B

Choose from the list below the best control activity to prevent receiving products from unapproved vendors. A. Implement training for employees who communicate with vendors for purchasing. B. Regularly review approved vendors and their performance. Update the database to remove inactive vendors and those who do not not meet performance standards. C. Segregation of duties. D. All purchases routed through the purchasing department.

B

Choose from the list below the best control activity to prevent unauthorized purchase orders submitted to an unauthorized vendor that may result in unauthorized or fraudulent purchases. A. An authorized person from the department making the request must approve the purchase order. B. Separate the duties of ordering goods from receiving payment, and accounting responsibilities. C. Prenumber and account for purchase requisitions and purchase orders. D. Enforce segregation duties and only allow

B

Choose from the list below the best definition of inventory management. A. Inventory management oversees the lifecycle of a product from procuring raw materials through customer sales. (10) B. Inventory management is the process that coordinates the communication of inventory availability and needs across the purchasing, conversion, and sales processes. C. Inventory management describes products in the process of being manufactured. D. Inventory management receives the orders along with a su

B

Comparing payment information with purchase order and receiving report information will reduce the risk of A. Fraudulent misappropriation of fixed assets. B. Payments made for unauthorized or nonexistent purchases. C. Suboptimal use of cash which may result in loss of assets. D. All of these answers are correct.

B

Documentation is used to create, capture, evaluate, and audit processes in the AIS. When an area of business is well documented, companies benefit through effective audits. Which of the following best defines effective audits? (8) A. Similar processes throughout the company are performed consistently. B. Internal and external auditors need detailed information to understand an area of the business they are auditing. C. Documentation empowers thorough reviews of a department and can point directly to areas where efficiencies can be gained. D. New employees can quickly familiarize themselves with the department's work and processes.

B

Financial Ratio Analytics for raw materials purchasing. (10) A. Include purchasing ratios such as accounts receivable turnover days and inventory turnover. B. Include purchasing ratios such as accounts payable turnover days and purchases growth to sales growth. C. All of these answers are correct. D. Include purchasing ratios such as quick ratios and purchasing to sales.

B

Invoices paid twice may result in overpayments to vendors. Choose the best controls activity to address this risk. (10) A. Comparison of the total of the authorized vouchers submitted for payment to the total in cash disbursements journal for a specific period. B. Vendor, invoice, payment voucher, and supporting documentation must be tagged or cancelled to prevent reuse. C. Comparison of the payment information will purchase order and receiving report information. D. Take advantage of all su

B

When an area of the business is well documented, a company benefits through • Efficient knowledge transfer • Process improvements • Effective audits• For production companies: Standardized processes

Benefits of Documentation

-An employee colludes with a vendor to make a certain vendor win the process by providing internal information. -Vendors collude with each other and reach advance agreement as to the winning bidder for a particular contract.

Bid Rigging

fraudulent payments to vendors. Is what type of asset misappropriation?

Billing schemes

Bid rigging can happen when A. Employees have a kickback arrangement with the vendor. B. The winning bidders agree to compensate another bidder for intentionally losing the contract. C. All of these answers are correct. D. Employees provide "insider information" to the vendor.

C

Choose from the following list one of the forms of documentation in operator documentation. (8) A. Data flow diagrams B. Source code listings C. Flowcharts D. Enterprise relationship diagrams

C

The process of comparing the monthly bank statement with the company's general ledger to ensure that they are consistent is called a A. Check reconciliation B. Cash reconciliation C. Bank reconciliation D. Vendor reconciliation.

C

Which of the following is an example of an item that is captured in program documentation? (8) A. User Interface B. Error Messages C. System Features D. Input data and information output

C

The victim suffers damages as a result of relying on this false statement. (four elements of fraud) Which one is this?

Damages

A graphical representation of the flow of data in an information system. Describes the processes used in a system to manage the life cycle of the data, from generation (input) to storage (databases) to reporting (output).

Data Flow Diagram

Represents a decision on the flowchart. Yes/No question that must be answered. (process flowchart shape)

Diamond

For receiving control activities. This internal control "Physically segregate receiving employees from warehouse storage areas, production, and shipping." should be conducted by who?

Director of Operations

For receiving control activities. This internal control "To maintain segregation of duties, ensure that receiving employees do not initiate or authorize purchase transactions or have access to accounts payable and General Ledger records beyond the recording of goods receive." should be conducted by who?

Director of Operations

For the purchasing process. This internal control "Ensure that each blanket purchase order specifies monetary limits and has a specified duration." should be conducted by who?

Director of Operations

For the purchasing process. This internal control: "Separate the duties of ordering goods from receiving, payment, and accounting responsibilities" should be conducted by who?

Director of Operations

Identifies variances between the receiving report and the purchase order

Discrepancy Report

A formal record that describes a system or process. Documentation can serve as a future reference, such as a user guide for training, or as an official record, such as an audit trail.

Documentation

is a formal record that describes a system or process (8)

Documentation

A graphical illustration of all the tables in a database and their relationships. Are designed for business end users who don't have the technical skills to read a database schema. ERDs help users understand the layout and data within a relational database. There are three types of ERD: conceptual ERD, logical ERD, and physical ERD.

Entity Relationship Diagram

False, inflated, and duplicated invoices; ransomware and malware; spamming, spoofing, and phishing is an example of what type of fraud?

External Fraud

is fraud perpetrated by customers, vendors, or other outside parties against a company.

External Fraud

For receiving control activities. This internal control "Implement an ongoing performance monitoring program for suppliers that is based on receiving department reports." should be conducted by who?

Facility Manager

For receiving control activities. This internal control "Install cameras in the receiving areas / Ensure that policies and procedures and training for employees in receiving are clearly documented and authorized." should be conducted by who?

Facility Manager

The perpetrator either lies directly or hides the truth. (four elements of fraud) Which one is this?

False Statement

Overstatement of fixed assets in the financial statements because of capitalizing expenses and (book) -Bid rigging -Claiming that expected expenses are higher than they are (for greater funds)

Fixed Asset Additional risks

What is the first stage of fixed asset acquisition process?

Fixed Asset Procurement

What is the fourth stage of fixed asset acquisition process?

Fixed Asset Reconciliation

include land, land improvements, buildings, equipment and machinery used in production, office equipment, computer equipment, furniture and fittings, warehouse shelving, and vehicles.

Fixed Assets

may only be used for critical processes and systems, while less criticalitems have narratives

Flowcharts

Connects shapes together. In shape of an arrow. (process flowchart shape)

Flowline

is the "knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment".

Fraud

can be integrated into the enterprise risk assessment(company wide) or performed as a stand-alone process. -Like all other risks, fraud risks are addressed by creating a risk response and implementing internal controls to mitigate the risks. -Companies should address fraud risks since fraud can significantly impact profits and reputation.

Fraud Risk Assessment

Payment made for an inappropriate purpose (e.g., expense reimbursement schemes - for costs not incurred - at school too. Is what type of asset misappropriation?

Fraudulent disbursements

-Performing fraud risk assessments. -Creating an anti-fraud culture -Promoting fraud awareness through employee training -Establishing and maintaining an effective system of internal controls -Instituting a formal fraud investigation process

How companies can combat fraud.

The perpetrator knows the statement is false at the time it's stated. (four elements of fraud) Which one is this?

Knowledge

Theft after records occur (e.g., steal cash after sales). Is what type of asset misappropriation?

Larceny

A data flow diagram that gives a high-level overview of data flows. It must fit on one page, and it provides a snapshot of the data flow that is designed to be understood by all business audiences—from stakeholders to developers. It illustrates the exchange of information between external entities and the system. Also referred to as a context diagram.

Level 0 Diagram

A data flow diagram (DFD) that highlights the main functions carried out by the system and drills down further into the DFD process by "decomposing" the system. It breaks down each process into further subprocesses.

Level 1 Diagram

The most detailed data flow diagram, which allows the end user to understand the system and process in depth. This type of diagram assists in identifying control weaknesses or inefficiencies. Process numbers include decimal places to indicate subprocesses of a Level 1 process.

Level 2 Diagram

Information necessary for technical operators to execute and support the system (used by system operators) -Required equipment and supplies, execution commands, troubleshooting guidelines, etc.

Operator Documentation

captures the people who work there or the state ofoperations and internal control so It captures the functions of organizations so well that people outside an organization (e.g., external auditors, governments, etc.) may be interested in unseeing them.

Organizational Chart

RECEIVING: A supplier delivers an order along with a supplier-generated (BLANK) , which shows quantities and descriptions of items delivered, to the receiving department at the specified warehouse location.

Packing Slip

Input/Output represents data or information coming into process or leaving the process, such as an order incoming to the bakery. (shape)

Parallelogram

There are two primary methods of paying for purchases. What are they?

Paying for cash or using credit.

also known as the cash disbursements processes, involve paying for acquisitions made in the purchasing processes. Impacts the amount of the cash line item, the most liquid of current assets on the Balance Sheet, by decreasing the cash balance.

Payment Process

are focused on paying for thoseresources

Payment Processes

Business pays for the time not worked. Is what type of asset misappropriation?

Payroll schemes

Is a motive or an incentive that pushes a person toward the decision to commit a fraud. - Feeling underpaid or underappreciated at work.

Perceived Pressure

What is it called of the cost to acquire fixed assets?

CAPEX

Terminator Shape on flowchart marks start/end of process. (shape)

Circle

What are the four types of corruption fraud schemes?

Conflict of interest, illegal gratuities, commercial bribery, and economic extortion.

is the inappropriate use of influence to obtain a benefit contrary to the perpetrator's responsibility or the rights of other people.

Corruption

Danielle purchased a new car with higher payments expecting a raise from her employer. When the raise didn't occur, Danielle started pocketing a bit of cash from the drawer each week to make up for the higher car payment since her employer didn't give her the raise that she deserved. What element of the fraud triangle is most closely related to Danielle's issue? (8) A. Perceived Pressure B. Opportunity C. Rationalization D. All of these answers are correct?

D

Documentation is used to create, capture, evaluate, and audit processes in the AIS. When an area of business is well documented, companies benefit through efficient knowledge transfer. Which of the following best defines efficient knowledge transfer? (8) A. Internal and external auditors need detailed information to understand an area of the business they are auditing. B. Similar processes throughout the company are performed consistently. C. Documentation empowers thorough reviews of a department and can point directly to areas where efficiencies can be gained. D. New employees can quickly familiarize themselves with the department's work and processes.

D

The textbook discussed four of the stages of the Fixed Asset acquisitions process. Which stage corresponds to the following description? "In addition to the purchasing and payment journal entries, the fixed asset accountant ensures the fixed asset subsidiary ledger is updated." A. Recording assets B. Receiving and tagging C. Depreciation D. Stage 4: Asset Reconciliation

D

There are four types of flowcharts used depending on the focus of the end user. Which of the following best defines a process flowchart? (8) A. A process flowchart shows the flow of documents, such as checks or requisitions of documents, through a process. B. A process flowchart illustrates the flow of information through a system. This includes how information is accesses and where data is stored. C. A process flowchart provides the sequence of coded instructions in a computer program that enables it to perform specified logical and arithmetical operations. D. A process flowchart depicts the flow of activity through the company. This includes the key parties and actions they performed.

D

Which of the following documentation tools can be used for documenting processes and systems? A. Checklists and questionnaires B. Organizational Charts C. Data Flow Diagrams D. Flowcharts

D

is a process that coordinates the communication of inventory availability and needs across the purchasing, conversion, and sales processes.

Inventory Management.

is a Balance Sheet line item that includes all items used in the creation of products. -Raw materials. -Work in process. -Finished Goods.

Inventory

What is the third stage of fixed asset acquisition process?

Recording fixed assets

Written descriptions of systems and processes as a form of documentation (Think of something like a manual, division of works among teams andteam members)• It's easier to update a narrative• Written descriptions of systems and processes as a form of documentation• These narratives describe responsibilities in detail, as well as the processes and controls that are in place• A narrative is often accompanied by a visual depiction, such as a flowchart.

Narrative Description

Also called internal fraud, is committed by owners, executives, management, and employees who use their positions to enrich themselves at the expense of the company. -Can include: corruption, asset misappropriation, and financial statement fraud.

Occupational fraud

Document represents a physical or digital document such as an email, purchase order, or invoice. Document.

Rectangle with wavy bottom.

Description of the system's programming logic and source code (used by programmers) (8) -Programming logic, data input and information output

Program Documentation

The purchase requisition evolves into a legally enforceable (blank). - quantities and for the prices specified in the (blank) order. - Once supplier accepts then it becomes a legal contract.

Purchase Order

- an initial request submitted by an employee to acquire goods or services.

Purchase requisition.

are focused on acquiring the necessary resources for abusiness to operate

Purchasing Processes

Shows the descriptions and quantities of goods received from vendors.

Receiving Report

What is the second stage of fixed asset acquisition process?

Receiving and tagging fixed assets

The victim relies on information when deciding or acting. (four elements of fraud) Which one is this?

Reliance

Not recording assets on F/S (e.g., writing off assets or not recording cash received). Is what type of asset misappropriation?

Skimming (cash, accounts receivable)

Marks a process on the flowchart such as baking cookies. (process flowchart shape)

Square

are areas within a flowchart that delineate the responsibilities of a business activity in flowcharts.

Swim lanes

Overview of the computer system with details of system design and architecture (used by system developers / auditors) -System architecture, user interface design, system interactions with each othe

Systems Documentation

Manual input depicts data that is manually input into a system, such as a user typing in their password or username to access the system. (shape)

Trapezoid

Merge. Connects two or more paths into a flowchart into a single flow line.

Triangle

Instructions for system users on how to interact with the system (used by end users / auditors reviewing documents) -How to use the system, instructions for inputting data or requesting reports

User Documentation

is the bill from the vendor that includes the related purchase order number, billing date, description and quantities of goods, the amount due, and payment terms.

Vendor Invoice

A written description of a system or process that describes responsibilities in detail, as well as the processes and controls that are in place. A narrative is often accompanied by a visual depiction, such as a flowchart.

narrative