Accounting Systems and Controls Exam Review
Course Introduction
Accounting Systems and Controls explores the design, implementation, and evaluation of accounting information systems (AIS) within organizations. The course examines how businesses use technology to collect, process, and report financial data, emphasizing the importance of internal controls to maintain data integrity, prevent fraud, and ensure accurate financial reporting. Students will analyze the principles and practices behind effective AIS, learn about common software applications, and assess controls in manual and computerized environments. Topics include system documentation, risk assessment, regulatory compliance, and best practices in system security and governance.
Recommended Textbook
Accounting Information Systems A Practitioner Emphasis 7th Edition by Cynthia D. Heagy
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Chapter 1: Significance of Accounting Information Systems
and the Accountants Role
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Sample Questions
Q1) Auditors do not need substantial technical knowledge about accounting systems to be able to carry out their responsibilities.
A)True
B)False
Answer: False
Q2) Identify the various types of auditors and briefly describe what they do.
Answer: Auditors are classified into three groups--external, internal, and governmental. External auditors perform a public service by expressing an opinion about the "fairness" of a client's financial statements. Internal auditors are employed by organizations to perform auditing for corporate management. Governmental auditors are employed by government agencies to report to government officials and public officials.
Q3) From what do accounting transactions result?
A) Both external and internal activities
B) External activities
C) Internal activities
D) Neither external nor internal activities
Answer: A
Q4) What are the major components of a computerized accounting system?
Answer: Hardware, software, and people
Page 3
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Chapter 2: Accounting Systems Documentation
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Sample Questions
Q1) Data flow diagrams include what symbols?
A) A stop-sign indicating that a process is complete
B) A circle to indicate a process or operation
C) A square to indicate the beginning point of a diagram
D) A square to indicate a data store
Answer: B
Q2) Define the following terms: file maintenance, level 0 DFD, data flow diagrams, exception report, system flowchart.
Answer: file maintenance (unique, non-routine, should be done by someone other than person doing day-to-day recording, includes adding/deleting accounts/customers/vendors), level 0 (entire system on one sheet, basic processes, major tasks), dfd (what system does and how it does it), exception report (shows deviations from a norm ONLY), system flowchart (most detailed, what system does and how it does it).
Q3) Because of the limited amount of detail, block diagrams are generally used in conjunction with other documentation that shows complementary aspects of an accounting system.
A)True
B)False
Answer: True
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Chapter 3: Essential Elements and Basic Activities of Accounting Systems
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Sample Questions
Q1) What type of file is set up during a processing operation and is purged when the operation is completed?
A) Backup file
B) Archive file
C) Scratch file
D) Program file
Answer: C
Q2) Which of the following statement(s) about real-time posting is (are) correct?
A) Real-time posting requires more computer and personnel resources than batch posting.
B) With real-time posting one single error may result in numerous errors.
C) Real-time posting allows users to have updated information throughout the business day.
D) All of these are true about real-time posting.
Answer: D
Q3) An example of a source document is a receiving report.
A)True
B)False
Answer: True
Page 5
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Chapter 4: Data Flows, Activities, and Structure of Accounting Systems
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Q1) Assume that data from the purchases transaction file have been transferred to the general journal transaction file. The general journal transaction file has been used to update the general ledger master file. What is the result if a trial balance is prepared at this time?
A) Inventory shows an increase, and accounts payable shows a decrease
B) Inventory shows a decrease, and accounts payable shows an increase
C) Inventory shows an increase, and accounts payable shows an increase
D) Inventory shows no change, and accounts payable shows no change
Q2) What is the subsystem labeled (2)?
A) General ledger
B) Cost accounting
C) Customer invoicing
D) Inventory management
Q3) What framework has proved to be a successful attempt to unify the elements and processes that are common to all accounting systems?
A) Business processes
B) Accounting data base
C) Hierarchies
D) Road maps
6
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Chapter 5: Reporting Process, Coding Methods, and Audit Trails
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Sample Questions
Q1) Which of the following statements is correct regarding extensible business reporting language (XBRL)?
A) XBRL is used to identify the content of financial data.
B) XBRL is used to format the presentation of financial data on web pages.
C) XBRL uses hypertext markup language (HTML) tags.
D) XBRL reports words and figures as standalone blocks of data.
Q2) Effective exception reporting depends on an accounting information system having the ability to do which of the following?
A) Sequence selected records based on the size of the differences between comparative account balances
B) Select records based on differences between current actual account balances and prior period actual account balances
C) Select records based on differences between actual account balances and the budgeted amount for those accounts
D) All of the above are important for effective exception reporting.
Q3) Record sequencing is the process of placing data in a specified order.
A)True
B)False
Q4) What is an audit trail?
Page 7
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Chapter 6: Internal Control and Risk Assessment
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Sample Questions
Q1) Define Enterprise Risk Management.
Q2) The audit committee is responsible for all the following EXCEPT:
A) Appointing and overseeing the external auditors.
B) Directing investigations of possible fraud.
C) Establishing internal control.
D) Reviewing financial information.
Q3) What does (4) represent?
A) Total cost
B) Loss area
C) Cost of controls
D) Level of assurance
E) Optimal point of reasonable assurance E
Q4) Which of the following characteristics usually does not describe a management philosophy or operating style that affects the internal environment?
A) Management's behavior toward other managers or personnel
B) Management's approach to external political factors
C) Management's attitude toward accounting functions
D) Management's approach to business risk
Q5) Describe the risk response component of the Enterprise Risk Management (ERM) framework.
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Chapter 7: Control Activities
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Q1) In the processing of a batch of purchase transactions, which of the following would be used to compute a hash total?
A) Vendor account numbers
B) Dollar amounts of vendor invoices
C) Number of vendor invoices in batch
D) Number of inventory items purchased
Q2) What kind of input control is involved when a self-checking digit is appended to a customer account number?
A) Data verification control
B) Data capture control
C) Classification and identification control
D) Hash control
Q3) General controls apply to the reliability and consistency of the overall information processing environment. To what do application controls apply?
A) All information processing activities
B) The flow of data in and among individual applications
C) The assignment and supervision of personnel
D) Accounting systems that use databases
Q4) List and describe the two basic types of encryption.
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Chapter 8: The Financial Process
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Q1) What types of entries are recorded in the financial process?
A) Data captured in and transferred from other processes
B) Reversing entries
C) End-of-period adjustments
D) All of the above are types of entries recorded in the financial process.
Q2) In what important respect is the general ledger module distinguished from the other modules?
A) The general ledger module is a financial reporting module.
B) The general ledger module is associated with specific business processes.
C) The general ledger module is used to record the planning and control activities related to purchases.
D) The general ledger module is used to record the acquisition, management, and promotion activities related to employees.
Q3) What types of business processes are first reflected in the general ledger module?
Q4) The chart of accounts is the listing of account names stored in the financial process along with codes assigned to the accounts.
A)True
B)False
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Chapter 9: The Revenue Process
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Q1) Using the pre-identification method for recording customer payments, the accounting system matches the remittances with specific open items using a type of artificial intelligence program
A)True
B)False
Q2) In the open item system, payments are applied to the outstanding balance rather than against particular invoices.
A)True
B)False
Q3) Which of the following is true regarding the balance forward method of accounting for accounts receivable?
A) Payments are applied to the outstanding balance rather than to particular invoices.
B) Payments are correlated with individual invoices.
C) Invoice records remain in the open invoice file until payment is received.
D) Invoice records remain open at the end of the period.
Q4) List and explain three examples of information processing authorization controls.
Q5) What is the difference between credit limit, credit rating, and credit hold?
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11
Chapter 10: The Purchasing Process
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Q1) List four of the five actions that result from the receipt of merchandise from a vendor.
Q2) "Resources" in the purchasing process refer to what?
A) To tangible goods and to intangible services
B) To tangible and intangible goods and to services
C) To intangible goods and to tangible services
D) To intangible goods and to services
Q3) Why is the automatic distribution entry useful in the accounts payable module?
A) An invoice must be channeled through several check points before approval for payment is made.
B) There are many invoices that run through an organization's accounts payable cycle.
C) Any manager can pull up invoices in the form of exception or periodic reports to determine any "red flags."
D) It permits the specification of a master account to which entries will be made.
Q4) Discuss risks associated with the payment of invoices (i.e., disbursement of cash) in the purchasing process.
Q5) Define and explain the purpose of retainages.
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Chapter 11: The Inventory Process
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Q1) What is the most popular inventory control report?
A) Excess inventory report
B) Inventory turnover report
C) Sales and gross profit report
D) Order recommendation report
Q2) Where does most of the data entry relating to inventory occur?
A) In the inventory and revenue processes.
B) In the revenue and financial processes.
C) In the revenue and purchasing processes.
D) In the inventory and purchasing process.
Q3) The inventory manager should be the only person who has access to the inventory on hand.
A)True
B)False
Q4) The larger the quantity of safety stock, the larger the stockout cost.
A)True
B)False
Q5) Inventory management is one of the simplest AIS processes.
A)True
B)False
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Chapter 12: Database Structure of Accounting Systems
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Q1) Which of the following statements best describes mapping in a database?
A) Mapping is the process of implementing the conceptual relationship in a database.
B) Mapping defines the relationship among the three levels of a database.
C) Mapping is the process of making a data element in one schema correspond to an element in another schema.
D) Mapping is the process of implementing a particular application as requested by the users.
Q2) A primary key is one or a group of data elements that uniquely identifies a record.
A)True
B)False
Q3) What type of relationship do a customer table and an inventory table have?
A) One to one
B) One-to-many
C) Many-to-many
D) B and C, but not A
Q4) Most companies develop their database management systems in house.
A)True
B)False
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Chapter 13: Developing a Relational Database for an Accounting Information System
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Q1) Which of the following would be the primary keys of the first three tables above?
A) CustCode, InvNo, ProdNo
B) InvNo, InvNo/ProdNo, ProdNo
C) InvNo/CustCode, ProdNo/Qty, ProdNo
D) InvDate/InvNo, ProdNo, Desc
Q2) What are the three steps that will normalize data with respect to the third normal form?
Q3) Converting a table into the second normal form applies to a table that has a composite key.
A)True
B)False
Q4) In the REA framework, relationships among entities can be which of the following?
A) One-to-one
B) One-to-many (many-to-one)
C) Many-to-many
D) All of the above
Q5) Briefly summarize the steps performed in developing a database system for an accounting system using the system output approach.
Page 15
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Chapter 14: Electronic Business
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Q1) Electronic business is any transaction (such as a purchase or a sale) completed over a computer network that involves the transfer of ownership or rights to use goods or services.
A)True
B)False
Q2) The complete format specifications for any EDI document is known as a transaction set.
A)True
B)False
Q3) Which of the following web assurance services provides a report indicating whether there are adequate controls over the company's IT-based system and a description of the management's assertions to the effectiveness of the controls?
A) TRUSTe
B) VeriSign
C) BBB OnLine
D) WebTrust
E) SysTrust E
Q4) Define an Electronic Data Interchange (EDI) system. List three advantages to using one of these systems.
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Chapter 15: Ais Selection and Implementation
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Q1) Which of the following is not an ERP package?
A) Oracle E-Business Suite
B) Lawson Enterprise
C) Microsoft Dynamics GP
D) Peachtree by Sage
Q2) Two very good tools for gathering in formation to help select the best accounting system are The Accounting Library and CTS Guides.
A)True
B)False
Q3) Discuss what is meant by enterprise resource planning (ERP) packages and give some examples of the leading packages.
Q4) Newer AIS software products will have a greater number of "bugs" than older products.
A)True
B)False
Q5) Finding the best accounting package for an organization is easy.
A)True
B)False
Q6) What is the difference in AIS installation and AIS implementation?
Page 17
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