AIS Final

Marina Filimena is an accountant at Jasmina Hair Products. Marina received the following error message while making an adjusting entry to the general ledger: "The account number referenced in your journal entry does not exist. Create a new account?" This is an example of a A) validity check. B) closed loop verification. C) zero-balance check. D) completeness test.

A) validity check.

How is credit approval generally handled for established customers with a documented payment history? A) A new credit application is requested. B) General authorization by a sales clerk C) Specific authorization by the credit manager D) A formal credit check should be made for each sale.

B) General authorization by a sales clerk

Which of the decisions below is not ordinarily found as part of the revenue cycle? A) What credit terms should be offered? B) How often should accounts receivable be subjected to audit? C) How can customer payments be processed to maximize cash flows? D) What are the optimal prices for each product or service?

B) How often should accounts receivable be subjected to audit?

Identify a useful tool for monitoring accounts receivable. A) ERP exception report B) accounts receivable aging report C) accounts receivable tolerance report D) customer credit limit report

B) accounts receivable aging report

The results of an internal audit finds that there is a problem with inaccurate time data being entered into the payroll system. What is an applicable control that can help prevent this event from occurring in the future? A) proper segregation of duties B) automation of data collection C) sound hiring procedures D) review of appropriate performance metrics

B) automation of data collection

Falk Noam is the internal auditor for Matan Incorporated. Before investigating the HRM / payroll cycle at Matan, Falk decided to read up on the proper segregation of duties regarding payroll disbursement processes. For strongest segregation of duties, the ________ should distribute paychecks. A) accounts payable department B) cashier C) internal audit department D) external auditor

B) cashier

Adjusting entries that are made to counteract the effects of errors found in the general ledger are called A) accruals. B) corrections. C) deferrals. D) estimates.

B) corrections.

It has been discovered that credit sales have been made to customers with a poor credit rating. If this continues, the company will face increasing uncollectible receivables and losses due to bad debts. Separation of duties between ________ and ________ should help resolve the problem. A) shipping; billing duties B) credit approval; marketing C) billing; credit approval D) marketing; accounts receivable

B) credit approval; marketing

During a routine audit, a review of cash receipts and related accounting entries revealed discrepancies. Upon further analysis, it was found that figures had been entered correctly and then subsequently changed, with the difference diverted to a fictitious customer account. This is an example of A) kiting. B) data diddling. C) data leakage. D) phreaking.

B) data diddling.

Identify the adjusting entry that is made at the end of an accounting period to reflect an exchange of cash prior to the performance of a related event is classified as a(n) A) accrual entry. B) deferral entry. C) revaluation entry. D) correcting entry.

B) deferral entry.

Adjusting entries that are made to recognize revenue that has been received but not yet earned are classified as A) estimates. B) deferrals. C) accruals. D) revaluations.

B) deferrals.

Regularly reviewing an accounts receivable aging report can help management do what? A) identify customers who have not purchased anything lately B) determine whether changes are needed in the firm's credit policies C) improve the speed which customers make payments D) determine whether the firm's pricing policy is effective

B) determine whether changes are needed in the firm's credit policies

When a computer criminal gains access to a system by searching through discarded records, this is referred to as A) data diddling. B) dumpster diving. C) eavesdropping. D) data squatting.

B) dumpster diving.

An accounts receivable aging report is useful for doing everything except A) estimating bad debts. B) estimating future sales. C) projecting the timing of future cash flows. D) deciding whether to increase a specific customer's credit limit.

B) estimating future sales.

Marina Filimena is an accountant at Jasmina Hair Products. Marina received the following error message while making an adjusting entry to the general ledger: "Your journal entry must be a numeric value. Please reenter." This is an example of a A) validity check. B) field check. C) zero-balance check. D) completeness test.

B) field check.

A company uses the method for tracking accounts receivable where customers pay according to individual sales invoices. This describes the ________ method. A) monthly statement B) open-invoice C) balance forward D) cycle billing

B) open-invoice

Adjusting entries that are made to reflect differences between the actual and recorded value of an asset or a change in accounting principle are called A) reconciliations. B) revaluations. C) estimates. D) accruals.

B) revaluations.

One of the basic activities in the expenditure cycle is the receiving and storage of goods, supplies, and services. What is the counterpart of this activity in the revenue cycle? A) sales order entry process B) shipping function C) cash collection activity D) cash payments activity

B) shipping function

A power outage is an example of a(n) ________ threat. A) natural and political disasters B) software errors and equipment malfunctions C) unintentional acts D) system inefficiency

B) software errors and equipment malfunctions

Basic segregation of duties requires the credit manager reports to the ________ and the treasurer report to the ________. A) treasurer; controller B) treasurer; vice president of finance C) controller; vice president of finance D) marketing manager; vice president of finance

B) treasurer; vice president of finance

Which type of threat causes the greatest dollar losses? A) software errors and equipment malfunctions B) unintentional acts C) intentional acts D) system inefficiency

B) unintentional acts

When would an MRP inventory approach be a preferred to a JIT inventory approach? A) when a product has a short life cycle B) when demand for inventory is fairly predictable C) when demand for inventory is very unpredictable D) MRP is always a preferred method over JIT.

B) when demand for inventory is fairly predictable

The benefits of XBRL include A) organizations can publish financial information only once, using standard XBRL tags. B) tagged data is readable and interpretable by computers, so users don't need re-enter data into order to work with it. C) Both are benefits of XBRL. D) Neither is a benefit of XBRL.

C) Both are benefits of XBRL.

For strongest segregation of duties, a sales representative should never be allowed to A) discuss the company's products. B) negotiate the sales price. C) approve a sale on credit. D) send a customer a gift.

C) approve a sale on credit.

What is the best control to reduce the risk of losing payroll data? A) passwords B) physical security controls C) backup and disaster recovery procedures D) encryption

C) backup and disaster recovery procedures

In the ________ method of tracking accounts receivable, customers pay according to the amount showing on their monthly statement and payments are applied against the total account balance. A) specific identification B) open-invoice C) balance forward D) remittance advice

C) balance forward

To ensure proper segregation of duties, only the ________ has authority toissue credit memos. A) accounts receivable supervisor B) controller C) credit manager D) cashier

C) credit manager

XBRL stands for A) extensible business reporting language. B) extreme business reporting ledgers. C) external business reporting language. D) extensive business report logic.

C) external business reporting language.

LOLer was chatting online with l33ter. "I can't believe how lame some people are! :) I can get into any system by checking out the company website to see how user names are defined and who is on the employee directory. Then, all it takes is brute force to find the password." LOLer is a ________, and the fraud he is describing is ________. A) hacker; social engineering B) phreaker; dumpster diving C) hacker; password cracking D) phreaker; the salami technique

C) hacker; password cracking

"Cooking the books" is typically accomplished by all the following except A) overstating inventory. B) accelerating recognition of revenue. C) inflating accounts payable. D) delaying recording of expenses.

C) inflating accounts payable.

The general ledger and reporting system consists of the ________ involved in ________ the general ledger and ________ reports. A) business transactions; updating; processing B) data processing; business transactions for; printing C) information processing; updating; creating D) business transactions; data processing; preparing

C) information processing; updating; creating

Falk Noam is the internal auditor for Matan Incorporated. Before investigating the HRM / payroll cycle at Matan, Falk decided to read up on the proper segregation of duties regarding payroll disbursement processes. For strongest segregation of duties, the ________ should periodically observe the paycheck distribution process. A) accounts payable department B) cashier C) internal audit department D) external auditor

C) internal audit department

According to generally accepted accounting principles, a sale is recognized when A) cash is received from the customer. B) inventory is removed from the warehouse. C) inventory becomes the legal property of the customer. D) a sales order is approved by sales, inventory control, and credit departments.

C) inventory becomes the legal property of the customer.

At a minimum, a switch to IFRS from GAAP will affect companies' accounting information system by A) requiring companies to increase the processing power of their existing accounting information systems. B) requiring IT departments to hire programmers that are fluent in languages besides English. C) requiring the creation of additional fields in research and development (R&D) records to capture information about the stage of research and development that costs are incurred in. D) requiring firms to completely redesign their existing accounting information systems because current systems are not compatible with IFRS accounting principles.

C) requiring the creation of additional fields in research and development (R&D) records to capture information about the stage of research and development that costs are incurred in.

A fraud technique that slices off tiny amounts from many projects is called the ________ technique. A) Trojan horse B) round down C) salami D) trap door

C) salami

Which of the following is a control that addresses the threat of unauthorized changes to the payroll master file? A) field checks B) batch totals C) segregation of duties D) sound hiring procedures

C) segregation of duties

The most vital control in preventing unauthorized changes to the payroll master file is A) hiring totally honest people to access and make changes to this file. B) segregation of duties between the preparation of paychecks and their distribution. C) segregation of duties between the authorization of changes and the physical handling of paychecks. D) having the controller closely review and then approve any changes to the master file.

C) segregation of duties between the authorization of changes and the physical handling of paychecks.

Because it is the most fungible of all assets, the management of cash has always been the most difficult of all control issues. The most important of cash controls is A) minimization of cash handling. B) lockbox arrangements. C) segregation of duties. D) frequent reconciliation of records.

C) segregation of duties.

By using an ERP to merge the billing, sales, and marketing functions, the firm may be able to A) bill the customer right after the sale occurs. B) market products and services on bills sent to customers. C) use customer's past purchase history to send information about related products and services the customer may be interested in. D) eliminate the need for a firm to have a billing, sales, and marketing department.

C) use customer's past purchase history to send information about related products and services the customer may be interested in.

Marina Filimena is an accountant at Jasmina Hair Products. Marina received the following error message while making an adjusting entry to the general ledger: "The amounts debited and credited are not equal. Please correct and try again." This is an example of a A) validity check. B) field check. C) zero-balance check. D) completeness test.

C) zero-balance check.

Which of the following controls would be the least effective in preventing paying the same invoice twice? A) Only pay from original invoices. B) Cancel each document in the voucher package once the check is prepared and mailed. C) Only pay vendor invoices that have been matched and reconciled to a purchase order and a receiving report. D) Allow only the accounts payable department to authorize payment for vendor invoices and allow only the cash disbursements department to cut and mail checks to vendors.

D) Allow only the accounts payable department to authorize payment for vendor invoices and allow only the cash disbursements department to cut and mail checks to vendors.

What is the key difference between the MRP and JIT inventory management approaches? A) Only JIT reduces costs and improves efficiency. B) MRP is especially useful for products such as fashion apparel. C) JIT is more effectively used with products that have predictable patterns of demand. D) MRP schedules production to meet estimated sales needs; JIT schedules production to meet customer demands.

D) MRP schedules production to meet estimated sales needs; JIT schedules production to meet customer demands.

Which of the following is a control that can be implemented to help prevent paychecks being issued to a "phantom" or "ghost" employee? A) The cashier should sign all payroll checks. B) Sequentially prenumber all payroll checks. C) Use an imprest account to clear payroll checks. D) Paychecks should be physically distributed by someone who does not authorize time data or record payroll.

D) Paychecks should be physically distributed by someone who does not authorize time data or record payroll.

Which of the following is not a key decision that needs to be made in the revenue cycle? A) How should merchandise be delivered to customers? B) Should credit be extended to customers? C) How can customer payments be processed to maximize cash flow? D) Which vendor should inventory be purchased from?

D) Which vendor should inventory be purchased from?

Which of the following statements is not true regarding XBRL? A) XBRL is a variant of XML. B) XBRL is specifically designed for use in communicating the content of financial data. C) XBRL creates unique tags for each data item. D) XBRL's adoption will require accountants and systems professionals tag data for their clients.

D) XBRL's adoption will require accountants and systems professionals tag data for their clients.

Vendor invoices are approved by the ________, which reports to the ________. A) purchasing department; controller B) accounts payable department; treasurer C) purchasing department; treasurer D) accounts payable department; controller

D) accounts payable department; controller

Data diddling is A) gaining unauthorized access to and use of computer systems, usually by means of a personal computer and a telecommunications network. B) unauthorized copying of company data such as computer files. C) unauthorized access to a system by the perpetrator pretending to be an authorized user. D) changing data before, during, or after it is entered into the system in order to delete, alter, or add key system data.

D) changing data before, during, or after it is entered into the system in order to delete, alter, or add key system data.

Marina Filimena is an accountant at Jasmina Hair Products. Marina received the following error message while making an adjusting entry to the general ledger: "The data you have entered does not include a source reference code. Please enter this data before saving." This is an example of a A) validity check. B) field check. C) zero-balance check. D) completeness test.

D) completeness test.

One way of ensuring that recurring adjusting journal entries are made each month would be to A) make all the entries a month in advance. B) rotate the responsibility among the accounting staff. C) program the entries to be made automatically. D) create a standard adjusting journal entry file.

D) create a standard adjusting journal entry file.

Which of the following is the easiest method for a computer criminal to steal output without ever being on the premises? A) dumpster diving B) use of a Trojan horse C) using a telescope to peer at paper reports D) electronic eavesdropping on computer monitors

D) electronic eavesdropping on computer monitors

Depreciation expense and bad debt expense are examples of which type of adjusting journal entry? A) deferrals B) accruals C) revaluations D) estimates

D) estimates

Which of the following duties could be performed by the same individual and not violate segregation of duty controls? A) handling cash and posting to customer accounts B) issuing credit memos and maintaining customer accounts C) handling cash and authorising credit memos D) handling cash receipts and mailing vendor payments

D) handling cash receipts and mailing vendor payments

A method for tracking accounts receivable that matches specific invoices and payments from the customer is called a(n) ________ method. A) specific identification B) balance forward C) cycle billing D) open-invoice

D) open-invoice

Dimitri Ivanov is an accountant with PwC. The firm has a very strict policy of requiring all users to change their passwords every sixty days. In early March, Dimitri received an e-mail claiming that there had been an error updating his password and that provided a link to a website with instructions for re-updating his password. Something about the e-mail made Dimitri suspicious, so he called PwC's information technology department and found that the e-mail was fictitious. The e-mail was an example of A) social engineering. B) piggybacking. C) spamming. D) phishing.

D) phishing.

Adjusting entries that reflect a change in accounting principle used to value inventories are classified as A) corrections. B) estimates. C) deferrals. D) revaluations.

D) revaluations.

Which of the following is not an example of social engineering? A) obtaining and using another person's Social Security number, credit card, or other confidential information B) creating phony websites with names and URL addresses very similar to legitimate websites in order to obtain confidential information or to distribute malware or viruses C) using e-mail to lure victims into revealing passwords or user IDs D) setting up a computer in a way that allows the user to use a neighbors unsecured wireless network

D) setting up a computer in a way that allows the user to use a neighbors unsecured wireless network

It was late on a Friday afternoon when Makari Polzin got a call at the help desk for Taggart Transcontinental. A man with an edge of panic in his voice was on the phone. "I'm really in a bind and I sure hope that you can help me." He identified himself as John Galt from the Accounting Department. He told Makari that he had to work on a report that was due on Monday morning and that he had forgotten to bring a written copy of his new password home with him. Makari knew that Taggart's new password policy required that passwords be at least fifteen characters long, must contain letters and numbers, and must be changed every sixty days, had created problems. Consequently, Makari provided the password to John. The caller was not John Galt, and Makari was a victim of A) phreaking. B) war dialing. C) identity theft. D) social engineering.

D) social engineering.

Identify the threat below that is not one of the four types of threats faced by accounting information systems. A) natural and political disasters B) software errors and equipment malfunctions C) unintentional acts D) system inefficiency

D) system inefficiency

Who should provide the adjusting entries in a well-designed general ledger and reporting system? A) various user departments B) the treasurer's area C) the other major AIS subsystems D) the controller's area

D) the controller's area

A type of data entry control that would ensure that adjusting entries are posted to existing general ledger accounts is called a(n) ________ check. A) validity B) existence C) closed loop verification D) reasonableness

A) validity

Suppose management wanted to increase the speed of processing customer payments. One way to speed up payment transaction processing is to A) use a FEDI. B) use JEDI analysis software. C) eliminate credit sales. D) extend the amount of credit offered to customers.

A) use a FEDI.

Which of the following scenarios will not be allowed under IFRS? A) A landscaping and garden retail store keeps piles of river rock, gravel, paving stones, and small decorative rocks in a fenced area on the side of the store. The store uses the most recent inventory costs when calculating cost of goods sold, since new inventory is piled on top of the older inventory. B) A grocery store strictly enforces a shelf rotation policy, so that older inventory is always at the front and sold first. The store uses the oldest inventory costs to calculate cost of goods sold. C) A farm chemical supplier maintains a large holding tank of chemicals, into which deliveries are periodically combined with the older chemicals. The supplier averages the cost of all inventory to calculate cost of goods sold. D) All of the above are acceptable under IFRS.

A) A landscaping and garden retail store keeps piles of river rock, gravel, paving stones, and small decorative rocks in a fenced area on the side of the store. The store uses the most recent inventory costs when calculating cost of goods sold, since new inventory is piled on top of the older inventory.

Requiring all packing slips be reconciled to purchase orders before accepting a delivery of inventory would be most likely to prevent which of the following situations? A) A supplier delivers more inventory than ordered at the end of the year and sends an invoice for the total quantity delivered. B) An employee mails a fake invoice to the company, which is then paid. C) The inventory records are incorrectly updated when a receiving department employee enters the wrong product number on the receiving report. D) Receiving department employees steal inventory and then claim the inventory was received and delivered to the warehouse.

A) A supplier delivers more inventory than ordered at the end of the year and sends an invoice for the total quantity delivered.

Which of the following statements is not true about an XBRL instance document? A) An instance document includes instruction code as to how the document should be physically arranged and displayed. B) An instance document contains facts about specific financial statement line items. C) An instance document uses separate tags for each specific element. D) An instance document can be used to tag financial and nonfinancial elements.

A) An instance document includes instruction code as to how the document should be physically arranged and displayed.

The following control can reduce the distribution of fraudulent paychecks. A) Have internal audit investigate unclaimed paychecks. B) Allow department managers to investigate unclaimed paychecks. C) Immediately mark "void" across all unclaimed paychecks. D) Match up all paychecks with time cards.

A) Have internal audit investigate unclaimed paychecks.

IFRS is an acronym for what? A) International Financial Reporting Standards B) Internal Forensic Response System C) Input and Financial Reporting Standards D) Internal Fault Recovery System

A) International Financial Reporting Standards

________ is a simple, yet effective, method for catching or preventing many types of employee fraud. A) Requiring all employees to take annual vacations B) Monitoring employee bank accounts and net worth C) Monitoring employee behavior using video cameras D) Explaining that fraud is illegal and will be severely punished to employees

A) Requiring all employees to take annual vacations

The accounts receivable clerk destroys all invoices for sales made to family and friends and does not record the sales in the accounts receivable subsidiary ledgers. The family and friends usually give the clerk cash as a "thank you." Which procedure will not prevent or detect this fraud? A) Send monthly statements to all customers with balances owed. B) Reconcile sales invoices in the billing department to the total debits to accounts receivable subsidiary ledgers. C) Sequentially prenumber all invoices and prepare a sequence check at the end of each day. D) Reconcile the accounts receivable control account to the accounts receivable subsidiary ledger

A) Send monthly statements to all customers with balances owed.

Which of the following is true about IFRS? A) There is a global trend towards using IFRS for reporting purposes, though U.S. companies are not currently required to do so. B) The switch to IFRS is required by the Sarbanes-Oxley Act. C) IFRS is only slightly different than U.S. GAAP. D) The switch to IFRS is cosmetic only—there isn't any real impact on AIS.

A) There is a global trend towards using IFRS for reporting purposes, though U.S. companies are not currently required to do so.

Which of the following is not an example of one of the basic types of fraud? A) While straightening the store at the end of the day, a shoe store employee finds and keeps an expensive pair of sunglasses left by a customer. B) An executive devised and implemented a plan to accelerate revenue recognition on a long-term contract, which will allow the company to forestall filing for bankruptcy. The executive does not own any stock, stock options or grants, and will not receive a bonus or perk because of the overstated revenue. C) A purchasing agent places a large order at higher-than-normal unit prices with a vendor that gave the agent tickets to several football games. D) A salesperson approves a large sales discount on an order from a company owned partially by the salesperson's sister.

A) While straightening the store at the end of the day, a shoe store employee finds and keeps an expensive pair of sunglasses left by a customer.

Falk Noam is the internal auditor for Matan Incorporated. Before investigating the HRM / payroll cycle at Matan, Falk decided to read up on the proper segregation of duties regarding payroll disbursement processes. For strongest segregation of duties, the ________ should record payroll. A) accounts payable department B) cashier C) internal audit department D) external auditor

A) accounts payable department

Recording interest earned on an investment is an example of which type of adjusting journal entry? A) accrual entry B) deferral entry C) revaluation entry D) correcting entry

A) accrual entry

Not all journal entries affect cash flow. Adjusting entries that reflect events that have already occurred, but have no effect on cash, are classified as A) accruals. B) deferrals. C) revaluations. D) corrections.

A) accruals.

Immediately after the adjusting entries are posted, the next step in the general ledger and reporting system is to prepare A) an adjusted trial balance. B) closing entries. C) financial statements. D) an unadjusted trial balance.

A) an adjusted trial balance.

The accounts receivable management method typically used by credit card companies is A) balance forward. B) postbilling. C) monthly statement. D) open-invoice.

A) balance forward.

When a proper segregation of duties exists in the area of handling cash receipts, the ________, who reports to the ________, actually handles the cash and is not the same person who posts cash receipts to customer accounts. A) cashier; treasurer B) cashier; controller C) accountant; treasurer D) accountant; controller

A) cashier; treasurer

Which of the following is not a management characteristic that increases pressure to commit fraudulent financial reporting? A) close relationship with the current audit engagement partner and manager B) pay for performance incentives based on short-term performance measures C) high management and employee turnover D) highly optimistic earnings projections

A) close relationship with the current audit engagement partner and manager

A major way in which IFRS differs from GAAP that will affect the design of a company's general ledger and reporting system is an IFRS principle known as A) componentization. B) monetization. C) securitization. D) none of the above

A) componentization.

Key differences exist when an integrated Enterprise Resource Planning system (ERP) replaces an existing AIS or legacy system. For example, ________ are more accurate and timely, enabling sales order entry staff to provide customers more accurate information about delivery dates. A) inventory records B) cash receipts C) credit approval decisions D) exception reports

A) inventory records

Perhaps the most striking fact about natural disasters in relation to AIS controls is that A) many companies in one location can be seriously affected at one time by a disaster. B) losses are absolutely unpreventable. C) there are a large number of major disasters every year. D) disaster planning has largely been ignored in the literature.

A) many companies in one location can be seriously affected at one time by a disaster.

Excessive heat is an example of a(n) ________ threat. A) natural and political disasters B) software errors and equipment malfunctions C) unintentional acts D) system inefficiency

A) natural and political disasters

What control would best mitigate the threat of paying an invoice twice? A) never authorizing payment of a photocopy of an invoice B) double-checking mathematical accuracy of invoices C) approval of purchase orders D) maintaining adequate perpetual inventory records

A) never authorizing payment of a photocopy of an invoice

A(n) ________ system posts an approved invoice to the vendor account and stores it in an open invoice file until payment is made by check. A) nonvoucher B) voucher C) cycle D) evaluated receipt settlement

A) nonvoucher

Although there are some similarities between JIT and MRP, identify one major difference below. A) production scheduling B) reducing the opportunity for inventory theft C) reducing inventory carrying costs D) requires more analysis than EOQ

A) production scheduling

Evaluated receipt settlement approves payment of vendor invoices after reconciling the purchase order and the A) receiving report. B) vendor invoice. C) sales invoice. D) disbursement voucher.

A) receiving report.

Regularly reviewing an accounts receivable aging report can help management do what? A) spot firms who are falling behind in their payments B) identify customers who have not purchased anything lately C) improve the speed which customers make payments D) determine whether the firm's pricing policy is effective

A) spot firms who are falling behind in their payments

For strongest segregation of duties, the credit manager should never report to A) the marketing department. B) the accounting department. C) the credit department. D) the IT department.

A) the marketing department.

True or False: Shipping efficiency can often be improved by replacing RFID tags with bar codes.

FALSE