Accounting Information Systems
Midterm Exam
Course Introduction
Accounting Information Systems explores the design, implementation, and management of information systems that collect, process, and report accounting data for decision-making and control in organizations. The course covers fundamental concepts such as data modeling, internal controls, system documentation, and the role of information technology in modern accounting practices. Students learn to analyze the flow of information within and between accounting cycles, evaluate system risks, and apply software tools to support accounting functions. Emphasis is placed on understanding how integrated information systems contribute to efficient business operations, regulatory compliance, and strategic planning.
Recommended Textbook
Forensic Accounting and Fraud Examination 1st Edition by Mary Jo Kranacher
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16 Chapters
916 Verified Questions
916 Flashcards
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Chapter 1: Core Foundation Related to Fraud Examination and Financial
Forensics
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71 Verified Questions
71 Flashcards
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Sample Questions
Q1) Financial statement fraud is often attributed to pressures, such as all of the following except:
A) investment losses.
B) meeting analysts' expectations.
C) deadlines, and cutoffs.
D) qualifying for bonuses.
Answer: A
Q2) Under generally accepted auditing standards GAAS auditors are not currently responsible for planning and performing auditing procedures to detect immaterial misstatements, regardless of whether they are caused by error or fraud.
A)True
B)False
Answer: True
Q3) Rationalization must occur before the act of abuse or fraud.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Careers in Fraud Examination and Financial
Forensics
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Sample Questions
Q1) The statement is frequently made that the financial statements are "not misleading and are free of material errors, irregularities, and fraud." What does this statement mean?
Answer: The financial statements are seldom perfect and frequently contain estimates, approximations, and minor errors that would not generally not have an effect on the decision making process of the reader. For example, in a firm with annual revenues of five million dollars unintentionally overstating office supplies expense and understating freight-out expense by five hundred dollars has no real affect on the net income, retained earnings, total assets of the company, total liabilities, or owners' equity. Such an error is minor, approximately one hundredth of one percent of revenues, obviously a greater percentage of net income. And during the audit the auditors, exercising due diligence and care, found no evidence supporting intentional or unintentional misstatements and no deviations from GAAP not addressed in the text of the financial reports.
Q2) The audit committee is:
A) independent of the board of directors.
B) is a subcommittee of the board of directors.
C) is responsible for reviewing the effectiveness of internal controls.
D) Both B and C are correct answers.
Answer: D
Page 4
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Chapter 3: Who Commits Fraud and Why: Criminology and Ethics
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Sample Questions
Q1) Can a law permit an action that is prohibited by a profession's code of ethics?
Discuss and give an example.
Answer: It may happen that a law might permit an action that is prohibited by a profession's code of ethics. As an example, for years the American Institute of Certified Public Accountants AICPA had rules of ethics that prohibited advertising by its members. The profession believed that dignity and objectivity were enhanced by keeping practitioners out of this aspect of the commercial world. The U.S. Federal Trade Commission and the U.S. Department of Justice, however, disagreed. They decided that the prohibitions against advertising violated the laws barring restraint of trade. The government forced the profession to eliminate its rules against advertising. This example illustrates the triumph of one set of values the government's belief that competition through advertising would benefit consumers over another set the profession's belief that dignity should be preserved. Text page 77
Q2) White-collar crime is not used interchangeably with occupational fraud and economic crime.
A)True
B)False
Answer: False
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Chapter 4: Complex Frauds and Financial Crimes
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Sample Questions
Q1) Financial statement fraud is complex because it often involves collusion.
A)True
B)False
Q2) Which of the following methods is used to make detection of persons responsible for money laundering more difficult:
A) The use of electronic bank transfers
B) The use of cashier's checks
C) The use of commercial checks
D) All of the above
Q3) Which of the following is NOT an example of financial statement fraud:
A) Managing the reserves in order to "smooth" earnings
B) Accruing an expense in the current period when it should be recognized in the following period
C) Filling an order, billing the customer for the order, and then shipping it to a company owned warehouse
D) Both "a" and "b"
Q4) "Churning" involves the sale and purchase of securities for the sole purpose of earning a commission.
A)True
B)False
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Chapter 5: Cybercrime: Computer and Internet Fraud
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Sample Questions
Q1) The "computer as a symbol" involves using a computer to intercept data transmission.
A)True
B)False
Q2) Cyber-crime involves the use of cell phones.
A)True
B)False
Q3) Computer crime and computer fraud are synonyms.
A)True
B)False
Q4) Computer crime involves the attempt to access data illegally.
A)True
B)False
Q5) An employee, having authorized access to a work computer, commits fraud while using the computer. This is an example of a computer crime.
A)True
B)False
Q6) Computers offer cyber criminals efficient ways to hide fraudulent activities.
A)True
B)False
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Chapter 6: Legal, Regulatory, and Professional Environment
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52 Verified Questions
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Sample Questions
Q1) Probable cause is the standard by which law enforcement may make an arrest, conduct a personal or property search, or obtain a warrant.
A)True
B)False
Q2) The Twentieth Amendment entitles a person to due process of law and equal protections under the Law.
A)True
B)False
Q3) What are the three major types of negotiated remedies and how do they differ?
Q4) In the criminal justice system, how is probation different from parole?
Q5) Which of the following is not a major form of negotiated settlements in a civil trial?
A) out-of-court settlements
B) majority jury vote
C) arbitration
D) mediation
Q6) How did the Sarbanes-Oxley Act address corporate governance and public accounting responsibilities?
Q7) What are the factors that affect the decision to prosecute an entity?
Page 8
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Chapter 7: Fraud Detection: Red Flags and Targeted Risk Assessment
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Sample Questions
Q1) SAS No. 99 lists several steps in considering the risk of fraud in a financial statement audit. All of the following are correctly stated except:
A) Auditors must brainstorm with the key personnel of both the internal and independent audit teams to plan a strategy to detect fraud.
B) Auditors must evaluate the audit evidence throughout the audit and respond to any identified misstatements.
C) Auditors must determine the types of fraud risks that exist.
D) Auditors are required to report all fraud to an appropriate level of management.
Q2) Generally, how is the problem of management override and collusion addressed?
Q3) Information systems:
A) as a mechanism for fraud prevention, deterrence, and detection cannot be overstated.
B) usually provide weak evidence trails due to their digital nature.
C) can be used to reconstruct actual data flow of considerable value to the fraud specialist.
D) generate small amounts of red flags, each of which requires further investigation.
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Chapter 8: Detection and Investigations
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Sample Questions
Q1) Investigators and accountants can find data on the internet regarding:
A) Time a person spent in prison
B) Whether or not a person is eligible for social security disability income
C) The type of property owned by an individual
D) All of the above
Q2) Intent:
A) Need not be proved directly
B) Must be proved
C) Must be proved with evidence
D) Both "b" and "c"
Q3) Which government agency handles export and import licenses:
A) Commerce department
B) Department of the Treasury
C) Department of State
D) None of the above
Q4) Circumstantial evidence
Q5) Using a copy of an electronic file is not allowed in court.
A)True
B)False
Q6) Types of evidence
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Chapter 9: Effective Interviewing and Interrogation
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Sample Questions
Q1) Admission seeking questions are posed in a precise order designed to:
A) Clear an innocent person
B) Encourage the culpable person to confess
C) Both A and B
D) None of the above
Q2) ________ questions contain the answer as a part of the question.
A) Open
B) Closed
C) Affirmative
D) Leading
Q3) Provide a chronological sequence for the introductory phase in interviewing a fraud suspect using the following stages.
1) Establish the interview theme
2) Observe reactions
3) Establish rapport
4) Provide the introduction
A) 4, 3, 1, 2
B) 4, 2, 3, 1
C) 1, 2, 3, 4
D) 2, 3, 4, 1
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Chapter 10: Using Information Technology for Fraud
Examination and Financial Forensics
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57 Verified Questions
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Sample Questions
Q1) There are two major ways to test IT systems - the "black-box" approach, and the "white-box" approach, which utilizes a relatively small dataset to test the system.
A)True
B)False
Q2) This type of graphic organizes information about events chronologically to determine what has occurred:
A) Link chart
B) Association matrix
C) Timeline
D) Flow diagram
Q3) List five assertions of management in respect to financial statements.
Q4) IDEA can read, display, analyze, manipulate, sample, and extract data from files obtained from many sources in only one format.
A)True
B)False
Q5) What is the purpose of timelines in an investigation?
Q6) List and describe three graphical techniques used to support the forensics professional.
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Chapter 11: Cash Receipt Schemes and Other Asset
Misappropriations
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Sample Questions
Q1) When an employee skims money off-book sales of merchandise, the theft can be detected by comparing the register tape to the cash drawer.
A)True
B)False
Q2) Lapping is the crediting of one account through the abstraction of money from another account.
A)True
B)False
Q3) Clothing store employees typically get significant 30 - 50% employee discounts on store purchases for personal clothing purchases. How can management audit employee discounts to insure the clothing discounts are not given to friends and family?
A) Compare adjustments to inventory to the void transactions of the employee
B) Extract sales with over 30& discount and summarize by employee
C) Summarize user access for the sales and inventory systems
D) Extract invoices with partial payments
Q4) "Death by a thousand cuts" involves stealing cash one thousand dollars at a time. A)True
B)False
13
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Chapter 12: Cash Disbursement Schemes
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Sample Questions
Q1) Fraudulent endorsement schemes commonly involve the interception of a signed check before mailing.
A)True
B)False
Q2) Obtaining blank checks is unnecessary if the fraudster can produce counterfeit checks.
A)True
B)False
Q3) Detecting fraudulent makers requires review of:
A) The bank statement
B) The cancelled checks
C) The accounting records
D) All of the above
Q4) In order for a ghost employee scheme to work, the paycheck for the ghost must go to the person involved in the scheme.
A)True
B)False
Q5) Overpayment of a vendor invoice is one example of a "pay and return" scheme.
A)True
B)False
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Chapter 13: Corruption and the Human Factor
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Sample Questions
Q1) Why is it problematic for an organization to set standards that are too high?
Q2) ________ is a process by which several bidders conspire to split up contracts and ensure that each gets a certain amount of work.
A) Blind bidding
B) Bid pooling
C) Expropriation
D) Splitting the pot
Q3) Which of the following is not a typical corruption scheme:
A) Economic extortion
B) Expropriation
C) Bribery
D) Conflicts of interest
Q4) The competitive bidding process, in which several suppliers or contractors are vying for contracts in what can be a very cutthroat environment can be subverted by:
A) Blind bidding
B) An abundance of bidders
C) Excessively low bids
D) Bid-rigging schemes
Q5) What is a kickback scheme, and how is it committed?
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Chapter 14: Financial Statement Fraud
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Sample Questions
Q1) The most common fraud schemes involving accounts receivable are:
A) Fictitious receivables
B) Failure to write-off accounts receivable as bad debts
C) Both A and B
D) Neither A nor B
Q2) Why might senior management overstate or understate business performance?
Q3) Financial statement analysis includes all of the following EXCEPT:
A) Stratified analysis
B) Vertical analysis
C) Horizontal analysis
D) Ration analysis
Q4) What are some of the ways in which financial statement fraud is committed?
Q5) What is the conceptual framework for financial reporting?
Q6) How can financial statement fraud be deterred?
Q7) Events occurring or becoming known after the close of the period may have a significant effect on the financial statements and should be disclosed are called:
A) Reportable events
B) Subsequent events
C) Proximate events
D) Known events
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Chapter 15: Consulting, Litigation Support, and Expert
Witnesses: Damages, Valuations, and Other Engagements
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Sample Questions
Q1) Compare two methods that can be used to develop estimates of lost sales and incremental expenses.
Q2) Successful plaintiffs may be awarded different types of damages. Which of the following is not considered damages?
A) Compensatory
B) Economic loss or restitution
C) Punitive
D) Emotional
Q3) What is included as an expert's work product?
Q4) The asset valuation model starts with the assumption that the organization's balance sheet does a reasonably good job of identifying the company's assets and liabilities.
A)True
B)False
Q5) Risk and return are inversely related.
A)True
B)False
Q6) What is the purpose of practice aids in forensic and valuation services?
Q7) How may lost profits be calculated using typical benchmarks?
Q8) What are the considerations related to forecasting income and cash flows? Page 17
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Chapter 16: Remediation and Litigation Advisory Services
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Sample Questions
Q1) Good corporate governance fosters:
A) Establishing a positive work environment by implementing programs and initiatives to enhance employee morale
B) Hiring and promoting employees who meet the high ethical standards of the entity
C) Disciplining those employees who fail to follow the code of conduct
D) All of the above
Q2) What steps should the forensic professional take, assuming that legal counsel initiated the fraud investigation?
Q3) The expert witness can also present a negative impression through:
A) Illustrations and analogies
B) Confidence
C) Hesitation when answering questions
D) Concise organizations
Q4) What is the difference between fact witnesses and expert witnesses?
Q5) Once illegal money has been combined with money from legitimate sources, one can no longer follow the money; the money can't be traced.
A)True
B)False
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