ACCT 440 AIS 1-5
A documentation tool that depicts the physical flow of information relating o particular transaction through an organization is a: a)Document flowchart b)Program flowchartc)Decision taled)Work distribution analysise)Systems survey
A
An accounting association established code of ethics for all members. What is one of the association's primary purpose of establish the code of ethics? a)To outline criteria for professional behaviour to maintain standards of integrity and objectivity b)To establish standards to follow for effective accounting practicec)To provide framework within which accounting policies could be effectively developed and executed d)To outline criteria that can be used in conducting interviews of potential new accountants
A
Budgets are necessary component of financial decision-making because the help provide an (an) a)Efficient allocation of resources b)Means to use of the firm's resourcesc)Automatic corrective mechanism for errorsd)Means to check managerial discretion
A
Controls that are designed to provide management with assurance of the realization of specified minimum margin of sales are: a)Directive controls b)Preventive controlsc)Detective controlsd)Output controls
A
Depreciation records include all of the following information about fixed assets except the a)Economic benefit of purchasing the asset b)Cost of the assetc)Depreciation method being used d)Location of the asset
A
Internal auditors are responsible for reporting the fraud to the Board Audit Committee when: a)The incidence of significant fraud has been established to a reasonable certainty b)Suspicious activities have been reported c)Irregular transactions have been indentified and are under investigationd)The review of all suspected fraud -related transactions is complete
A
Internal control should following certain basic principles to achieve its objective. One of these principles is the segregation of functions. Whichone of the following example does not violate the principle of segregation functions? a)The treasurer has the authority or sign checks but gives the signature block to the assistant treasurer to run the check-signingmachine b)The warehouse clerk, who has the custodial responsibility over inventory inthe warehouse, may authorize disposal of damaged goodsc)The sales manager has the responsibility approve credit and the authority to write off accountsd)The department time clerk is given the undistributed payroll checks o main to absent employees
A
Management has a role in the maintenance of control. In fact, management sometimes is a control. Which of the following involvesmanagerialfunctions as a control? a)Monitoring performance b)Use of an organizational policies manualc)Maintenance of quality assurance programd)Establish of in internal audit activity
A
Management has requested that the internal auditor investigate the possibility that a purchasing agent is receiving kickbacks. Which of thefollowing procedures is least effective in addressing managements concern? a)Confirm all contract terms with vendors b)Analyze, by purchasing agent, all increases in cost of procured goods from specific vendorsc)Take statisticalsample of goods purchased and compare purchase prices for goods with those of other sources of similar such as other organizations or catalogued)Observe any changes in the lifestyles or individual consumption habits of the purchasing agents involved
A
Red flags are conditions that indicate a higher likelihood of fraud. Which of the following is not considered a red flag? a)Management has delegated the authority to make purchases under a certain value to subordinates b)An individual has held the same cash-handling job for an extended period without any rotation of dutiesc)An individual handling marketable securities is responsible for making the purchases, recording purchases and reporting any discrepanciesand gains/ losses to senior managementd)The assignment of responsibility in the accounts receivable department is not clear.
A
The internal audit service typically provideswhich of the following to the Board Audit Committee? a)Overall evaluation of the adequacy and effectiveness of internal control processes b)A conclusion about the coverage and adequacy of the internal auditing report.c)The internal audit activity's working papersd)The committee's report to the governing board
A
The requirement that purchase be made from supplies on an approved vendor list is an example of a)Preventive control b)Detective controlc)Corrective controld)Monitoring control
A
The steps in a typical control process include:1) Selecting strategic control points at which to gather information about activities being performed 2) Accumulating, classifying and recording data samples3) Observing the work or collecting samples of data4) Determining whether performance is satisfactory5) Reviewing and revising standards6) Reporting significant deviations to managers concerned What is the proper order of these steps? a)1,3,2,4,6,5 b)1,2,3,4,5,6c)1,3,4,2,6,5d)1,3,4,2,5,6
A
Which of the following best defines control? a)Control is the result of proper planning, organizing and directing by management b)Controls are statements of what the organization chooses to accomplishc)Control is provided when cost-effective measures are taken to restrict deviations to a tolerable leveld)Control accomplishes objects and goals in an accurate, timely and economical fashion
A
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 accountingc)Purchasing, cash receipts, accounts payable, cash disbursements and payrolld)Inventory control, cost accounting, accounts payable, cash disbursements and payroll
A
Which of the following controls would prevent the ordering of quantitiesin excess of organization's needs? a)Review of all purchase requisitions by a supervisor in the user department prior to submitting them to the purchasing department b)Automatic reorder by the purchasing department when low inventory level is indicated by the systemc)A policy requiring review of the purchase order before receiving a new shipmentd)A policy requiring agreement of the receiving report and packing slip before storage of new receipt
A
Which of the following described a control weakness? a)Purchasing procedures are well designed and followed unless otherwise directed by the purchasing supervisor. b)Pre-numbered blackpurchase orders are secured within the purchasing departmentc)Normal operational purchases fell in the range from P500 to P1,000 with two signatures required for purchases over P1,000d)The purchasing agent invests in publicly traded mutual fund that lists the stock of one of the organization supplies in its portfolio
A
Which of the following functions should be segregated? a)Opening the mail and recording cash receipts in the journal b)Authorizing credit and determining reorder quantitiesc)Shipping goods and preparing the bill of ladingd)Providing information on inventory levels and reconciling the bank statement
A
Which of the following functions should be segregated? a)Opening the mail and recordingcash receipts in the journal b)Authorizing credit and determining reorder quantitiesc)Shipping goods and preparing the bill of ladingd)Providing information on inventory levels and reconciling the bank statement
A
Which of the following is a temporary file? a)Transaction file b)Master filec)Reference filed)Journal file
A
Which of the following is an indicator of possible financial reporting fraud being perpetrated by management of a manufacturer? a)A trend analysis discloses sales increases of 50% andcost of goods sold increases of 25% b)A ratio analysis discloses cost of goods sold is 50% of salesc)A cross -sectional analysis of common size statements discloses the firm's percentage of cost of goods sold to sales is 40% and theindustry average percentage of cost of goods sold to sales is 50%d)A cross -sectional analysis of common size statements discloses the firm's percentage of cost of goods sold to sales in 50% and theindustry average percentage of cost of goods sold to sales is 40%.
A
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 transactionsc)Distributing essential information to operations personnel to support their daily operationsd)Recording financial transaction the accounting records
A
Which of the following is not a true statement? a)Transactions are recorded on source documents and are posted to journals b)Transactions are recorded in journals and are posted to ledgersc)Infrequent transactions are recorded in the general journald)Frequent transactions are recorded in special journals
A
Which situation indicates a weak internal control structure in these instances? a)The AR clerk authorizes the write off of bad debts b)The record-keeping clerk maintains both AR and AP subsidiary ledgersc)The inventory control clerk authorizes inventory purchasesd)The AR clerk prepares customer authorizations every month
A
A fraud report is required:a)At the conclusion of the detection phase b)At the conclusion of the investigation phase c)At the conclusion of both the detection and investigation phasesd)Neither at the conclusion of the detection phase nor at the conclusion of the investigation phase
B
A programmer's accumulation of round-off errors into one account, which is later, accessed by the programmer, is a type of computer fraud.The best way to preventthis type of fraud is toa)Built in judgement with reasonableness tests b)Independently test programs during development and limit access to the program c)Segregate duties of systems development and programmingd)Use control totals and check the results of the computer
B
A system of internalcontrol includes physical controls over access to and use of asses and record. A departure from the purpose of such procedure is thata)Access to the safe-deposit box requires two officers b)Only storeroom personnel and line supervisors have access to the raw materials storeroom c)The mailroom compiles a list of the checks received in the incoming maild)Only sales persons and sales supervisors use sales department vehicles
B
Ensuring that all materials transactions processed by the information system are valid and in accordance with management's objectives is anexample of:a)Transaction authorization b)Supervision c)Control over accountingrecordsd)Independent verification
B
Inadequate system of internal controls is most likely to detect a fraud perpetrated bya)Group of employees in collusion b)Single employee c)Group of managers in collusiond)Single manager
B
Internal auditors regularly evaluate controls. Which of the following best describes the concept of control as recognized byinternal auditors?a)Management regularly discharges personnel who do not perform up to expectations b)Management takes action to enhance the likelihood that established goals and objectives will be achieved. c)Control represents specific procedures that accountants and auditors design to ensure the correctness of processingd)Control procedures should bedesigned from the bottom up to ensure attention to detail
B
Management can expect various benefits to follow from implementing a system of strong internal control. Which of the following benefits islikely to occur?a)Reduction of cost of an external audit b)Prevention of employee collusion to commit fraud c)Availability of reliable data for decision-making purposesd)Some assurance of compliance
B
Real time systems might be appropriate for all of the following, except:a)Airline reservations b)Payroll c)Point of sale transactionsd)Traffic control systems
B
The best reason for establishing a code of conduct within an organization is that such codesa)Are typically required by the government b)Express standards of individual behaviour for members of the organization c)Provide a quantifiable basis for personnel evaluationd)Have tremendous public relations potential
B
The following are subsystems of the accounting information system, excepta)Transaction processing system b)Human resource system c)General ledger/ financial reporting systemd)Management reporting system
B
The procedure requiring preparation of a prelisting of incoming cash receipts,with copies of the prelist going to the cashier and to account, is anexample of which type or control?a)Preventive b)Corrective c)Detectived)Directive
B
The production subsystem of the conversion cycle includes all of the following, except:a)Determining raw materials requirements b)Make or buy decisions on component parts c)Release of new materials into productiond)Scheduling the goods to be produced
B
When comparing perpetrators who have embezzled organization funds with perpetrators of financial statement of fraud, those who have falsified financial statement are less likely toa)Have experienced an autocratic management style b)Be living beyond their obvious means of support c)Rationalize fraudulent behaviour d)Use organizational expectations as justifications for the act
B
When goods are received and the receiving report has been prepared, which ledger may be updated?a)Standard cost inventory ledger b)Inventory subsidiary ledger c)General ledger d)Accounts payable subsidiary ledger
B
Which document triggers the update of theinventory subsidiary ledger?a)Bill of lading b)Stock release c)Sales order d)Shipping notice
B
Which of the following are elements included in the control environment?a)Organization structure, management philosophy and planning b)Integrity and ethical values, assignment of authority and human resource policies c)Competence of personnel, back up facilities, laws and regularsd)Risk assessment, assignment of responsibility and human resource practices
B
Which of the following is an example of feedback control?a)Preventive maintenance b)Inspection of completed goods c)Close supervision of production on line workersd)Measuring performance against a standard
B
Which of the following policies is most likely to result in an environment conducive to the occurrence of fraud?a)Budget preparation input by the employees who are responsible for meeting the budget b)Unreasonable shares and production goals c)The division's hiring process frequently results in the rejection of adequately trained applicantsd)The application of some accounting controls on sample basis.
B
Which of the following situations represents an internal control weakness in the payroll department?a)Payroll department personnel are rotated in their duties b)Pay checks are distributed by the employees' immediate supervisor c)Payroll records are reconciled with quarterly tax reportsd)The timekeeping function is independent of the payroll department
B
Which of the following statements is/ are true regarding the prevention of fraud?I -the primary means of preventing fraud is through internal control established and maintained by managementII -internal auditors are responsible for assisting in the prevention of fraud by examining and evaluating the adequacy of internal controlsystemIII -internal audits should assess the operating effectiveness of fraud -related communication systemsa)I only b)II and III only c)II onlyd)I, II and II
B
Which of the following would minimize defects in finished goods caused by poor quality raw materials?a)Documented procedures for the proper handling of work-in-process inventory b)Requirematerial specifications for all purchases c)Timely follow-up on all unfavourable usage variancesd)Determination of the amount of spoilageat the end of the manufacturing process
B
Which ofthe following transaction is often called a compensating control?a)Transaction authorization b)Supervision c)Accounting recordsd)Independent verification
B
A potential problem for a manufacturer is that purchasing agents may take kickbacks or receive gifts from vendors in exchangefor favourablecontracts. Which of the following is the lease effective in preventing this problem?a)A specific organizational policy prohibiting the acceptance of anything of value from a vendor b)An organization code of ethics that prohibits such activityc) A requirement for the purchasing agent to develop a profit of all vendors before the vendors is added to theauthorized vendor list .d)The establishment of long-term contracts with major vendors, with the contract terms approved by senior management
C
A purchasing agent receive expensive gifts from a vendor in return for directing a signify ant amount of business to that vendor. Which of thefollowing organizational policies most effectivelyprevents such an occurrence?a)Purchases exceeding specified monetary amounts should be approved by an official who determines compliance with budgetaryrequirements. b)Important high-volume materials sold regularly is purchased from at least two different sources in order to afford supply protection. c)The purchasing function should be decentralized and each department manager or supervisor does his/ her own purchasing. d)Competitive bids should be solicited on purchases to the maximum extent that is practicable.
C
A utility with a large investment in repair vehicle would most likely implement which internal control to reduce the risk of vehicle theft or loss?a)Review insurance coverage for adequacy b)Systematically account for all repair work orders c)Physically inventoryvehicles and reconcile the results with the accounting records d)Maintain vehicles in a secured location with release return subject to approval by a custodian
C
Auditors should have knowledge about red flags that have proven to be associated with management fraud. Which of the following factors havegenerally both been associated with management fraud?a)Generous performance-based reward systems b)A domineering management c)Regular comparison of actual results with budgets d)A management preoccupation withincreased financial performance
C
Because of the increased in published reportsof corporategovernance failures, senior management and the Board Audit Committee arerequesting additional services from internal auditors. This most likely includesevaluation of the:a)Reliability of external auditors b)Integrity of senior management c)Internal controls d)Accountability of senior management
C
Controls may be classified according to the function they are intended to perform, for example, detective, preventive or directive. Which of thefollowing is a directive control?a)Monthly bank statement reconciliation b)Dual signatures on all disbursements over a specific amount c)Recording every transition on the day it occurs d)Requiring all members of internal audit activity to be CPAs
C
Controls should be designed thata)Operations are performed efficiently b)Management's plans have not beencircumvented by worker collusion c)The internal audit activity guidance and oversight of managements performance is accomplished economically and efficiently d)Managements planning, organizing and directing processes are property evaluated.
C
Management can best strengthen internal control over custody of inventory stored in an off-site warehouse by implementing:a)Reconciliation of transfer slips to/ from the warehouse with inventory records b)Increases in insurance overage c)Regular reconciliation of physical inventories to accounting records d)Regular confirmation of the amount on hand with the custodian of the warehouse
C
Providing timely information about transaction in sufficient detail to permit proper classification and financial reporting is an example of:a)The control environment b)Risk assessment c)Information and communication d)Monitoring
C
The fraud scheme hat is familiar to the borrowing from Peter to pay Paul scheme is:a)Expense account fraud b)Bribery c)Lapping d)Transaction fund anomaly
C
The internal audit activity's responsibility for preventing fraud is toa)Establish internal control b)Maintain internal control c)Evaluate the system of internal control d)Exercise operating authority over fraud prevention activities.
C
The objectives of the data collection activity of the general model for AIS are to collect data that are:a)Relevant andredundant b)Efficient and objective c)Efficient and relevant d)Efficient and redundant
C
The policies and procedures helping to ensure that management directives are executed and actions are taken to address risks to achievement of objectives describe:a)Risk assessments b)Control environments c)Control activities
C
The primary purpose of establishing a code of conduct within a professional organization such as PICPA is toa)Reduce the likelihood that members of the profession will be sued for substandard work b)Ensure that all members of the profession perform at approximately thesame level of competence c)Promote an ethical culture among professions who serve others d)Require members of the profession to exhibit loyal in all matters pertaining to the affairs of their organization.
C
The underlying assumption of reasonable assurance regarding implementation of internal control means that:a)By the control that fraud has both occurred in the period b)Auditors are reasonably assured that employee carelessness can weaken an internal control structure c)Implementation of the control procedure should not have a significant adverse effect on efficiency or profitability d)Management assertions about control effectivenessshould provide auditors with reasonable assurancee)A control applies reasonably well to all forms of computer technology
C
When viewed from the highest to most elementallevel, the data hierarchy is:a)Attribute, record file b)Record, attribute, key c)File record, attribute d)File, record, keye)Key, record, file
C
When will a credit check approval most likely require specific authorization by the credit department?a)When verifying that the current transaction does not exceed the customer's credit limit b)When verifying that the current transaction is with a valid customer c)When a valid customer places a materially large order d)When a valid customer returns goods
C
Which of the following activities represents an appropriate personnel department function and deterrent to payroll fraud?a)Distribution of pay checks b)Authorization of overtime c)Authorization of additions and deletions from the payroll d)Collection andretention of unclaimed pay checks
C
Which of the following controls if property implemented, is most likely to crease the likelihood of fraud:a)Require period rotation of purchases among difference vendors b)Require rotation of duties among the three purchasing agents c)Require that receivable reports be sent directly to accounts payable requiring that the updated to the perpetual inventory recordbe made by the receiving department d)Require that the updates to perpetual inventory record be made by the receiving department
C
Which of the following is a red flag that an organization may be engaging in fraudulent activity?a)Financial statement results that are above the results for the industry and operations are slightly more efficient that the average for theindustry b)Lack of earnings growth despite large reserves of cash c)Existence of complex transactions that are difficult to understand and appear to have little business purpose d)Strong internal reporting in a company with decentralized operations
C
Which of the following is not a financial transaction?a)Purchase or products b)Cash receipts c)Updated valid vendor file d)Sale of inventory
C
Which of the following is not a necessary condition under to constitute a fraudulent act?a)Injury or loss b)Material fact c)Written documentation d)Justifiable reliance
C
Which of the following is not true of a turnaround document?a)They may reduce the number of errors made by external parties b)They are commonly used by utility companies c)They are documents used by internal parties only d)They are both input and output documents
C
Which of the following is the information that must be included in a fraud report at the conclusion of an investigation?a)Purpose, scope, results and when appropriate, an expression of auditors overall opinion b)Criteria, condition, cause and effect c)Background, observations and recommendations d)Observations conclusions, recommendations and corrective action
C
Which of the following is the principal advantage of budgeting?a)Employee motivation b)Performance evaluation c)Forced planning d)communication
C
Which of the following is true of the relationship between subsidiary ledgers and general ledger accounts?a)The two contain different and unrelated facts b)All general ledger accounts have subsidiaries c)The relationship between the two provides an audit trail from the financial statements to the source documents d)The total of subsidiary ledger accounts usually exceeds the total in the related general ledger account
C
Which of the following is true?a)Cash disbursement function is part of accounts payable b)Cash disbursements is an independent accounting function c)Cash disbursements is a treasury function d)Cash disbursement function in a part of the general ledger department
C
Which of the following statements regarding effective control systems is false?a)Excessive controls are costly in time and money b)Outdated information is inappropriate c)Controls should measure the performance of all areas d)Controls should be simple
C
Which of the following tasks should the cash disbursement clerk not perform?a)Review the supporting documents for completeness and accuracy b)Prepare checks c)Approve the liability d)Mark the supporting documents paid
C
Which statement is not true?a)Business activities begin with acquisition of materials, property and labour in exchange for cash b)The conversion rule includes the task of determining raw materials requirements c)Manufacturing firms have a conversion cycle but retail firms do not d)A payroll check is an example a product documents of the payroll systeme)A journal voucher is actually a special source document
C
Which task must still require human intervention in automated purchases/ cash disbursements system?a)Determination of inventory requirements b)Preparation of purchase order c)Preparation of receiving report d)Preparation of check register
C
A documentation tool used to represent the logical elements of a system is a (an)a)Programming flowchart b)Entity relationship diagramc)Document flowchart d)Dataflow diagram
D
A review of an organization's code of conduct revealed that it contained comprehensive guidelines designed to inspire high level of ethical behaviour. The reviews also revealed that employees were knowledgeable of its provisions. However, some of employees still did not comply withthe code. What element should a code of conduct containto enhance its effectiveness?a)Periodic review and acknowledgement by all employees b)Employee involvement in its developmentc)Public knowledge of its contents and purpose d)Provisions for disciplinary action in the event of violations
D
An internal auditor who suspects fraud should a)Determine that a loss has been incurred b)Interview those who have been involved in the control of assetsc)Identify the employees who could be implicated in the case d)Recommend an investigation after determining that fraud has occurred
D
COSO treats internal control a s process designed to provide reasonable assurance regarding the achievement of objective related toa)Reliability of financial reporting b)Effectiveness and efficiency of operationsc)Compliance with applicable laws and regulations d)All of the above e)None of the above
D
If internal control is well designed, two tasks that should be formed by difference persons are:a)Approval of bad debt write offs and reconciliation of accounts payable subsidiary ledger and controlling account b)Distribution f payroll checks and approval of sales returns for creditc)Posing of amounts from both the cash receipts journal and cash payments journal to the general ledger d)Recording of cash receipts and preparation of bank reconciliations
D
Themost effective internal control guidesavailable today is the COSO internal control integrated framework. Which of the following is one of its conclusions?a)Only management's participation is needed for control to be effective b)The control framework is tied to the business objectives, so it is not flexible enough to be adapted without a major undertakingc)Internal control is limited to accounting controls d)Operating efficiently and effectively are important aspects of the business
D
To conceal the theft of cash receipts from customers in payment of their accounts, which of the following journal entries should the bookkeeper make?a)Dr miscellaneous expense, Cr cash b)Dr petty cash, Cr cashc)Dr cash, CR accounts receivable d)Dr sales returns, CR accounts receivable
D
Which document typically triggers the process of recording liability?a)Purchase requisition b)Purchase order c)Receiving report d)Suppliers' invoice
D
Which document would an auditor most likely choose to examine closely to ascertain that all expenditures incurred during the accounting period have been recorded as liability?a)Invoices b)Purchase ordersc)Purchase requisitions d)Receiving reports
D
Which function or department stated below, records the decrease in inventory due to a sale?a)Warehouse b)Sales departmentc)Billing department d)Inventory control
D
Which is not an accountant's primary role in information systems?a)System user b)System auditor c)System designer d)System programmer
D
Which of the following are elements of the control environment?a)Integrity and ethical values b)Organizational structurec)Assignment of authority and responsibility d)All of the above e)None of the above
D
Which of the following best describesthe activities of the material management function?a)Purchasing, receiving and inventory control b)Receiving, sales, distribution and purchasing and accounts payablec)Receiving, storage, purchasing and accounts payable d)Purchasing, receiving and storage e)Purchasing, storage and distribution
D
Which of the following controls could be used to detect bank deposits that are recorded but never made?a)Establishing accountability for receipts at the earliest possible time b)Linking receipts to other internal accountabilities, for example, collections to either accounts receivable or salesc)Consolidating cash receiving points d)Having bank reconciliation performed by a third party
D
Which of the following controls is the least effective in preventing a fraud conducted by sending purchase order to bogus vendors?a)Require that all purchases be made from an authorized vendor list be maintained independently by the individual placing the purchaseorder. b)Require that only approved vendors e paid for purchases, based on actual producingc)Require contract with all major vendors from whom production components are purchased. d)Require that total purchases for a month not exceed the total budgetedpurchases for that month
D
Which of the following is a factor affecting risk?a)A new personnel b)New or revamped information systemsc)Rapid growth d)All of the above
D
Which of the following is not a characteristic of effective information?a)Retrieval b)Storagec)Summarization d)Precision
D
Which of the following is not an advantage of real time processing files over batch processing?a)Shorter transaction processing time b)Reduction of inventory stocksc)Improved customer service d)All are advantages
D
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 makingc)Support for the day to day operations of the firm d)All of the above are the objectives
D
Which one of the following departments does not have a copy of the purchase order?a)Purchasing department b)Receiving departmentc)Accounts payable departmentd)General ledger department
D
Which statement is not correct?a)Legacy systems may process financially significant transactions b)Some legacy systems use database technologyc)Mainframes are exclusive to legacy systems, while modern systems use only the client -server model d)All of the above are true
D
Sequential file processing will notpermita)Data to be edited on separate computer run b)The use of a database structurec)Data to be edited in an off line moded)Batch reprocessing to be initiated from a terminal e)Data to be edited on a real time basis
E
Which of the following best describes the activities of the production function?a)Maintenance, inventory control and production planning b)Production planning, qualitycontrol, manufacturing and cost accountingc)Quality control, production planning, manufacturing and payrolld)Maintenance, production planning, storage and quality control e)Manufacturing, quality control and maintenance
E