AIS Exam 4 Practice Test PDF
What percentage of occupational fraud is committed by upper management?
19%
What percentage for frauds are detected by tips?
46%
Programming to customize the baseline system carry forward into later versions, saves some enterprises millions of dollars for customizations that do not need to be abandoned or redone
False
The SOX legislation basically requires management of privately held companies to assess and report on the effectiveness of internal controls for financial reporting using a recognized framework.
False
The accounting profession is self-regulated.
False
The advantage to the stages approach to customizing an accounting system is that the new system goes ʺliveʺ all at once.
False
The internal control category control environment includes identifying, analyzing, and managing risks affecting the ability to report financial data properly.
False
The stages approach to customization involves customizing and installing customer, vendor, employee, and remaining modules for the entire enterprise at the same time.
False
Trouble shooting a complex system is easier to accomplish when entering a company's busy season
False
What are the events in the Adjusting Entries DFD?
Generate Trial Balance, Calculate adjustments, and Record adjusting entries
Which of the following would be the best protection for a company that wishes to prevent the lapping of trade accounts receivable?
Have customers send payments directly to the company's depository bank.
Which COSO Internal Control-Integrated Framework essential component of an effective internal control system includes the accounting system for identifying, recording, processing, and reporting transactions and financial data?
Information and Communication
Which COSO Internal Control-Integrated Framework essential component of an effective internal control system involves assessing internal controls as well as the process for taking corrective action?
Monitoring
To control incoming cash from the mail and ensure an accurate accounting, the department which should have complete control over the transaction is the
No one department should have complete control over incoming cash
Which level in the company corresponds to the Entry-Level IT controls?
Top Management
Computer software may be programmed to run at a specific time each day to perform a task, such as, checking inventory stock levels.
True
Control is established in the budgeting process by comparing the results of activity to the budget for each activity
True
Each step in the business process and workflow must be documented
True
IT general controls have a pervasive effect on all internal controls.
True
Internal controls for the accounting system are incomplete without IT controls.
True
Not even the strongest system of controls can eliminate all risk of organizations being defrauded by employees who are sufficiently motivated to find loopholes.
True
SOX emphasizes a strong system of internal control as a way of avoiding Enron-sized accounting frauds.
True
SOX section 404 requires each annual report of a publicly traded company to contain an internal control report to contain a assessment of the effectiveness of the companyʹs internal control structure and procedures.
True
While COSO is a broad framework for internal control in , COBIT provides the detailed IT processes necessary to provide IT controls for monitoring and evaluating the IT environment.
True
The Purchase Order Line table is an intersection table required to eliminate the many-to-many relationship between the Purchase Order table and the Item table.
True?????
How long does the typical fraud last before being detected?
Two years
The Create Purchase Orders, Receive Items, and Enter Bills are in which baseline accounting system?
Vendor
Which of the following internal control procedures will most likely prevent the concealment of a cash shortage resulting from the improper write-off of a trade account receivable?
Write-offs must be approved by a responsible officer after review of credit department recommendations and supporting evidence
A warehouse employee uses a document to fulfill a customer order. The employee is most likely using a:
a picking list
The prices entered on a sales order should be independent of the sales order function. To achieve this transaction cycle control, the company's ordering system should use
an independently prepared master price list authorized by management
The prices entered on sales orders should be independent of the sales order function. To achieve this transaction cycle control, the company's ordering system should use
an independently prepared master price list authorized by management.
The authority to accept incoming goods in receiving should be based on a(an)
approved purchase order
The three types of functions that normally should be segregated to promote internal control are
authorizing transactions, recording transactions, and custody of assets
A proposed transaction processing application will have many data capture sources and outputs in paper and electronic form. To ensure that transactions are not lost during processing, an IS auditor should recommend the inclusion of:
automated systems balancing.
Which of the following procedures in the cash disbursements cycle should not be performed by the accounts payable department?
canceling supporting documentation after payment
The function responsible for forwarding voucher checks directly to payees is ________.
cash disbursements
Intentional or reckless conduct, whether intentional or not, and which results in materially misleading financial statements, is called
fraudulent financial reporting
Effective internal control procedures over the payroll function may include
verification of agreement of job-time tickets with employee clock card hours by a payroll department employee
General controls can be a substitute for application controls.
False
Input controls ensure data is processed properly.
False
To provide an adequate separation of functions in the accounts receivable business process, maintaining the subsidiary accounts receivable ledger should be the responsibility of ________.
Accounts Receivable
The customization approach that involves the system going ʺliveʺ all at once is called
Big bang
A gap analysis is done to
Compare the baseline accounting system to the customized accounting system that meets the companyʹs needs
Which of the following types of data validation editing checks is used to determine if a field contains data, and not zeros or blanks?
Completeness check
Which general IT control covers acquisition, implementation, and maintenance of system software including the operating system, DBMS, network software, and security software?
Computer operations controls
Which general IT control covers acquisition, implementation, and maintenance of system software including the operating system. DBMS, network software, and security software?
Computer operations controls
Which of the following is not a universal rule for achieving strong internal control over cash?
Decentralize the receiving of cash as much as possible
A negative answer given to a question on an internal control questionnaire almost always indicate a weakness in an internal control process area
False
Application controls are designed to provide assurance that processing occurred.
False
As business processes for a new system are planned, workflow management is not considered.
False
As business processes for a new system are planned, workflow management is not considered.
False
By changing business processes to match the baseline system, a company can expect to increase the need for custom programming
False
By changing business processes to match the baseline system, a company can expect to increase the need for custom programming.
False
COBIT provides high-level strategic guidance for meeting overall internal control objectives.
False
Corruption involves theft of assets for personal gain
False
Which COSO Internal Control-Integrated Framework essential component of an effective internal control system involves identifying, analyzing, and managing risks that affect a company's ability to record, process, summarize, and report financial data properly?
Risk Assessment
When depositing a customer payment, which table is usually not used?
Sales Order Table
Which SOX section requires the public accounting firm that audits the financial statements of the company to issue an attestation report regarding the effectiveness of the company's internal controls?
Section 404. Management Assessment of Internal Controls
Which IT process domain, as defined by COBIT, relates to IT strategy and tactics to contribute to attaining business goals?
Plan and Organize (PO) Domain
Which organization was created by the Sarbanes-Oxley Act of 2002?
Public Company Accounting Oversight Board (PCAOB)
Which of the following controls would be most effective in ensuring that recorded purchases are free of material errors?
Purchase orders, receiving reports, and vendor's invoices are matched independently in preparing vouchers
Which COSO Internal Control-Integrated Framework essential component of an effective internal control system involves identifying, analyzing, and managing risks that affect a company's ability to record, process, summarize, and report financial data properly?
Risk Assessment
Which of the following is an effective internal accounting control over cash payments?
Signed checks should be mailed under the supervision of the check signer
Acme purchase narrative: Acme needs to purchase more copper to make widgets. Acme submits an order to the copper vendor online. When Acme receives the copper shipment, the receiving department processes the shipment. Acme receives an automatic invoice and processes the bill. The corresponding database tables are updated. What are the events in the Acme purchase narrative?
Submit Purchase Order, Process Shipment, Process Bills
Which of the following would the auditor consider to be an incompatible operation if the cashier receives remittances from the mailroom?
The cashier posts the receipts to the accounts receivable subsidiary ledger cards
Which of the items below would not be considered a possible common exposure for a corporation?
The corporation never was billed for a sale of merchandise shipped to a customer.
Which of the following is not part of the audit committee's responsibilities?
The organization's ability to process data efficiently and effectively
What documents typically accompany the physical shipment of goods to a customer?
The packing list and a bill of lading
Which of the objectives listed below is not considered part of the internal control process?
The prevention of fraud and embezzlement
An essential input field that should contain data is empty. The data edit control that would detect this error is a ________.
completeness check
Management's philosophy and operating style are part of which component of internal control?
control environment
The component of internal control that is the foundation for all other components is
control environment
For good internal control, the billing department should be under the direction of the
controller
To reduce the possibility of losing data during processing, the FIRST point at which control totals should be implemented is:
during data preparation
For effective internal control purposes, the vouchers payable department should generally
establish the agreement of the vendor's invoice with the receiving report and purchase order
"Amounts due to vendors should be accurately and promptly classified, summarized, and reported" is a representative control objective of the
expenditure cycle
The most likely result of the ineffective internal control policies and procedures in the revenue cycle is that
final authorization of credit memos by personnel in the sales department could permit an employee defalcation scheme
As payments are received, one mailroom employee is assigned the responsibility of prelisting receipts and preparing the deposit slip prior to forwarding the receipts, deposit slip, and remittance advices to accounts receivable for posting. AR personnel refoot the deposit slip, stamp a restrictive endorsement on the back of each check, and then forward the receipts and deposit slip to treasury department. Evaluate the internal control of the described process. Which of the following is a reasonable assessment of internal control in this process?
inadequate internal control because of a lack of segregation of duties
How many aspects of computer processing tend to significantly
increase an organization's exposure to undesirable events
Application controls are often classified as
input, processing, and output.
Which of the following documents is used to post sales on account to customers in the accounts receivable ledger?
invoices
The reentry of transaction data with machine comparison of the initial entry to the second entry to detect errors is called
key verification
Vendor payment is typically made
once an invoice is posted
The document(s) which accounts payable should use to verify a purchase transaction is (are)
purchase requisition, invoice, receiving report, and purchase order.
The department or function that is responsible for selecting a vendor to order materials from is
purchasing
Internal accounting control is strengthened when the quantity of merchandise ordered is omitted from the copy of the purchase order sent to the
receiving department
For internal control purposes, which of the following individuals preferably should be responsible for the distribution of the payroll checks?
receptionist
The identification and analysis of differences between the values contained in two substantially identical files or between a detail file and a control file is ________.
reconciliation
Which of the following is not an objective of internal control?
relevance of financial statements
A turnaround document that is used to enhance internal control and promote the accuracy of incoming cash receipts is the
remittance advice
An audit committee
should be primarily composed of only external board members (a NYSE requirement)
An effective internal accounting control measure that protects against the preparation of improper or inaccurate disbursements would be to require that all checks be
signed by an officer after necessary supporting evidence has been examined
