Accounting Information Systems
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Course Introduction
Accounting Information Systems explores the design, implementation, and management of information systems that support accounting activities and decision-making. The course covers fundamental topics such as the components of accounting systems, internal controls, data modeling, transaction processing cycles, and the integration of accounting software within business operations. Students examine the role of technology in achieving accurate financial reporting, safeguarding assets, and complying with regulatory requirements. Through practical examples and case studies, students gain hands-on experience with commonly used accounting applications and develop skills to analyze and improve accounting processes in a range of organizational settings.
Recommended Textbook Information Technology Auditing 4th Edition by James Hall
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Page 2
Chapter 1: Auditing and Internal Control
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Q1) Discuss the key features of Section 302 of the Sarbanes-Oxley Act.
Answer: Section 302 requires corporate management (including the chief executive officer [CEO]) to certify financial and other information contained in the organization's quarterly and annual reports. The rule also requires them to certify the internal controls over financial reporting. The certifying officers are required to have designed internal controls, or to have caused such controls to be designed, and to provide reasonable assurance as to the reliability of the financial reporting process. Furthermore, they must disclose any material changes in the company's internal controls that have occurred during the most recent fiscal quarter.
Q2) Why is an Independent Audit Committee important to a company?
Answer: The Sarbanes-Oxley Act requires all audit committee members to be independent and requires the audit committee to hire and oversee the external auditors. This provision is consistent with many investors who consider the board composition to be a critical investment factor. For example, Thompson Financial survey revealed that most institutional investors want corporate boards to be comprised of at least 75% of independent directors
Q3) Locking petty cash in a safe is an example of __________________________. Answer: access controls
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Chapter 2: Auditing IT Governance Controls
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Q1) What are the often cited benefits of IT outsourcing?
Answer: Oft-cited benefits of IT outsourcing include improved core business performance, improved IT performance (due to the vendor's expertise), and reduced IT costs.
Q2) For most companies, which of the following is the least critical application for disaster recovery purposes?
A) month-end adjustments
B) accounts receivable
C) accounts payable
D) order entry/billing
Answer: A
Q3) The following are examples of commodity assets except
A) network management
B) systems operations
C) systems development
D) server maintenance
Answer: C
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Chapter 3: Auditing Operating Systems and Networks
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Q1) A formal log-on procedure is the operating system's first line of defense. Explain how this works.
Answer: When the user logs on, he or she is presented with a dialog box requesting the user's ID and password. The system compares the ID and password to a database of valid users. If the system finds a match, then the log-on attempt is authenticated. If, however, the password or ID is entered incorrectly, the log-on attempt fails and a message is returned to the user. The message should not reveal whether the password or the ID caused the failure. The system should allow the user to reenter the log-on information. After a specified number of attempts (usually no more than five), the system should lock out the user from the system.
Q2) Discuss the public key encryption technique.
Answer: This approach uses two different keys: one for encoding messages and the other for decoding them. The recipient has a private key used for decoding that is kept secret. The encoding key is public and published for everyone to use. Receivers never need to share private keys with senders, which reduces the likelihood that they fall into the hands of an intruder. One of the most trusted public key encryption methods is Rivest-Shamir-Adleman (RSA). This method is, however, computationally intensive and much slower than private key encryption.
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Chapter 4: Auditing Database Systems
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Q1) A replicated database is appropriate when
A) there is minimal data sharing among information processing units
B) there exists a high degree of data sharing and no primary user
C) there is no risk of the deadlock phenomenon
D) most data sharing consists of read-write transactions
Q2) Which statement is not correct? A query language like SQL
A) is written in a fourth-generation language
B) requires user familiarity with COBOL
C) allows users to retrieve and modify data
D) reduces reliance on programmers
Q3) The database approach to data management is sometimes called the flat file approach.
A)True
B)False
Q4) An entity is any physical thing about which the organization wishes to capture data. A)True
B)False
Q5) What services are provided by a database management system?
Q6) What are the four elements of the database approach? Explain the role of each.
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Chapter 5: Systems Development and Program Change
Activities
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Q1) What are program version numbers and how are the used?
Q2) List four types of facts that should be gathered during an analysis of a system.
Q3) Recurring costs include: hardware maintenance, software acquisition, software maintenance, insurance, supplies and personnel costs.
A)True
B)False
Q4) Define the feasibility measures that should be considered during project analysis and give an example of each.
Q5) Legal feasibility identifies conflicts between the proposed system and the company's ability to discharge its legal responsibilities
A)True
B)False
Q6) A commercial software system that is completely finished, tested, and ready for implementation is called a
A) backbone system
B) vendor-supported system
C) benchmark system
D) turnkey system
Q7) List three methods used to control the source program library.
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Chapter 6: Transaction Processing and Financial Reporting
Systems Overview
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Q1) Give a brief description of each of the following documentation techniques: systems flowchart, and program flowchart.
Q2) What information is provided by a record layout diagram?
Q3) Real-time processing in systems that handle large volumes of transactions each day can create operational inefficiencies.
A)True
B)False
Q4) Batch processing systems can store data on direct access storage devices. A)True
B)False
Q5) Sequential storage means
A) data is stored on tape
B) access is achieved through an index
C) access is direct
D) reading record 100 requires first reading records 1 to 99
Q6) What are the key distinguishing features of legacy systems?
Q7) For what purpose are ER diagrams used?
Q8) Why is the audit trail necessary?
Q9) Why is the audit trail important? Page 8
Q10) What are the major exposures in the general ledger/financial reporting system?
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Chapter 7: Computer Assisted Audit Tools and Techniques
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Q1) Discuss the three categories of input of input controls.
Q2) Achieving batch control objectives requires grouping similar types of input transactions (such as sales orders) together in batches and then controlling the batches throughout data processing.
A)True
B)False
Q3) Give one example of an error that is detected by a check digit control.
Q4) All of the following are disadvantages of the test data technique except
A) the test data technique requires extensive computer expertise on the part of the auditor
B) the auditor cannot be sure that the application being tested is a copy of the current application used by computer services personnel
C) the auditor cannot be sure that the application being tested is the same application used throughout the entire year
D) preparation of the test data is time-consuming
Q5) Describe parallel simulation.
Q6) If all of the inputs have been validated before processing, then what purpose do run-to-run controls serve?
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Chapter 8: Data Structures and Caatts for Data Extraction
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Q1) Comment on the following statement: "Legacy systems use flat file structures."
Q2) In a relational database
A) the user's view of the physical database is the same as the physical database
B) users perceive that they are manipulating a single table
C) a virtual table exists in the form of rows and columns of a table stored on the disk
D) a programming language (COBOL) is used to create a user's view of the database
Q3) What is the update anomaly?
Q4) How can a poorly designed database result in unintentional loss of critical records?
Q5) What is a partial dependency?
Q6) The term occurrence is used to describe the number of attributes or fields pertaining to a specific entity.
A)True
B)False
Q7) Explain how linkages between relational tables are accomplished.
Q8) How does the embedded audit module support the auditor?
Q9) Give three examples that illustrate how cardinality reflects an organization's underlying business rules.
Page 11
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Chapter 9: Auditing the Revenue Cycle
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Q1) What specific internal control procedure would prevent a customer from being billed for all 50 items ordered although only 40 items were shipped?
Q2) The bill of lading is a legal contract between the buyer and the seller.
A)True
B)False
Q3) The warehouse is responsible for updating the inventory subsidiary ledger.
A)True
B)False
Q4) What function does the receiving department serve in the revenue cycle?
Q5) Commercial accounting systems have fully integrated modules. The word "integrated" means that
A) segregation of duties is not possible
B) transfer of information among modules occurs automatically
C) batch processing is not an option
D) separate entries are made in the general ledger accounts and the subsidiary ledgers
Q6) What specific internal control procedure would prevent an increase in sales returns since salesmen were placed on commission?
Q7) How is independent verification carried out in a manual revenue system?
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Chapter 10: Auditing the Expenditure Cycle
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Q1) Explain the purpose of each of the following documents used in the payroll system: the personnel action form, the job ticket, the time card.
Q2) The purpose of the purchase order is to
A) order goods from vendors
B) record receipt of goods from vendors
C) authorize the purchasing department to order goods
D) approve payment for goods received
Q3) Why would an organization require the paymaster to deliver all unclaimed paychecks to the internal audit department?
A) to detect a "phantom employee" for whom a check was produced
B) to prevent an absent employee's check from being lost
C) to avoid paying absent employees for payday
D) to prevent the paymaster from cashing unclaimed checks
Q4) Explain why a three way match may not be required for transactions covered by a trading partner agreement.
Q5) The inventory procurement process begins with the purchasing clerk preparing a purchase order.
A)True
B)False
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Chapter 11: Enterprise Resource Planning Systems
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Q1) Which statement is LEAST accurate?
A) Implementing an ERP system has as much to do with changing the way an organization does business than it does with technology.
B) The big-bang approach to ERP implementation is generally riskier than the phased in approach.
C) To take full advantage of the ERP process, reengineering will need to occur.
D) A common reason for ERP failure is that the ERP does not support one or more important business processes of the organization
Q2) OLAP stands for on-line application processing.
A)True
B)False
Q3) Companies are more likely to modify an ERP to accommodate the company than to modify company processes to accommodate the ERP.
A)True
B)False
Q4) The role model assigns specific access privileges directly to individuals.
A)True
B)False
Q5) What are the basic stages of the data warehousing process?
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Chapter 12: Business Ethics, Fraud, and Fraud Detection
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Q1) All of the following are conditions for fraud except
A) false representation
B) injury or loss
C) intent
D) material reliance
Q2) Define database management fraud.
Q3) Of the three fraud factors (situational pressure, ethics, and opportunity), situational pressure is the factor that actually facilitates the act.
A)True
B)False
Q4) Explain the problems associated with lack of director independence
Q5) The text discusses many questions about personal traits of executives which might help uncover fraudulent activity. What are three?
Q6) Sarbanes-Oxley (SOX)
A) imposes new corporate disclosure requirements
B) imposes new criminal penalties for fraud
C) both a. and b.
D) none of the above
Q7) Computer fraud is easiest at the data collection stage. Why?
Page 15
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