Accounting Systems and Controls
Midterm Exam
Course Introduction
This course provides an in-depth exploration of the design, implementation, and evaluation of accounting information systems, with a particular emphasis on systems controls and security. Students will learn how effective accounting systems support decision-making processes, ensure accurate financial reporting, and safeguard organizational assets against risks and fraud. The curriculum covers key topics such as systems documentation, internal controls, computerized accounting applications, systems development life cycle, and the impact of regulatory frameworks like SOX. Practical examples and case studies highlight how accounting professionals assess and improve system reliability, efficiency, and compliance within modern organizations.
Recommended Textbook
Accounting Information Systems 11th Edition by Marshall B. Romney Paul J. Steinbart
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Chapter 1: Accounting Information Systems
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Q1) Identify the components of an accounting information system.
Answer: A well-designed AIS consists of people,procedures and instructions,data,software,information technology infrastructure,and internal controls and security measures.
Q2) An analysis conducted by the Institute of Management Accountants shows that the most important activities performed by corporate accountants relate to
A)customer and product profitability.
B)internal consulting.
C)process improvement.
D)accounting systems and financial reporting.
Answer: D
Q3) The AIS must include controls to ensure
A)safety and availability of data.
B)marketing initiatives match corporate goals.
C)information produced from data is accurate.
D)both A and C
Answer: D
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Chapter 2: Overview of Business Processes
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Q1) In a chart of accounts using three digits for each account,each numeric digit has meaning to users of the AIS.For example,a numeric digit may represent either a major category of accounts,a primary financial subaccount within each category,or a specific account into which transaction data will be posted.Using this example,which digit position would best represent a primary financial subaccount within an account category?
A)first
B)second
C)third
D)fourth
Answer: B
Q2) Source documents are usually generated in the process of conducting common business activities.Name a source document connected with the human resources cycle.
Answer: Human resources (or payroll)cycle documents include employee's W-4 form,time cards,or job time tickets or time sheets.
Q3) Name the major transaction cycles.
Answer: The major transaction cycles are revenue,expenditure,human resources (or payroll),production,and financing.
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Page 4
Chapter 3: Systems Development and Documentation Techniques
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Q1) An analytical technique that uses standard symbols to graphically represent an information system in a clear,concise,and logical manner is called a A)data flow diagram.
B)flowchart.
C)schema.
D)narrative.
Answer: B
Q2) Which symbol would be used in a flowchart to represent a general ledger master file kept on magnetic disk?
A)#2
B)#5
C)#7
D)#8
Answer: C
Q3) P62 51)List the various types of flowcharts.
Answer: Document flowcharts,System flowcharts,Program flowcharts,Internal control flowcharts
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Page 5
Chapter 4: Relational Databases
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Q1) Using a file-oriented approach to data and information,data is maintained in A)a central database.
B)many interconnected files.
C)many separate files.
D)a decentralized database.
Q2) Dana Halsey is chair of the Purebred Marmoset Society,which maintains a database of registered purebred marmosets and their breeding history.Originally,the database was stored on index cards,but recently Dana has been exploring the use of a computerized system.One file in the system will store the name,birth date,and other characteristics of all of the marmosets that have been registered.Each marmoset is uniquely identified by a registration number.A second file will contain data that link each marmoset to its male and female parents by means of their serial numbers.The primary key in the first file is:
A)Name
B)Birth date
C)A foreign key in the second file.
D)The primary key in the second file.
Q3) What is a data dictionary?
Q4) What do you think will be the main impact of database technology in your career?
Q5) Describe the information that is contained in the data dictionary.
Page 6
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Chapter 5: Computer Fraud and Security
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Q1) One computer fraud technique is known as data diddling.What is it?
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
Q2) A set of unauthorized computer instructions in an otherwise properly functioning program
A)Logic bomb
B)Spyware
C)Trap door
D)Trojan horse
Q3) Discuss antivirus software programs.
Q4) How can companies reduce losses from fraud?
Q5) What is a computer fraud?
Q6) What are the actions recommended by the Treadway Commission to reduce the possibility of fraudulent financial reporting?
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Chapter 6: Control and Accounting Information Systems
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Q1) A ________________ helps top-level managers with high-level activities that demand frequent and regular attention.
A)Boundary system
B)Diagnostic control system
C)Interactive control system
D)Internal control system
Q2) Which of the following federal laws incorporated the language of the AICPA about controls into a law applying to all registered companies?
A)Foreign Corrupt Practices Act of 1977
B)The Securities Exchange Act of 1934
C)Federal Corruption Prevention Act of 1987
D)The Securities Act of 1933
Q3) Discuss the weaknesses in COSO's internal control framework that lead to the development of the Enterprise Risk Management framework.
Q4) What are the two categories of internal controls?
Q5) What are some of the ways to assign authority and responsibility within an organization?
Q6) What was the primary objective of the Foreign Corrupt Practices Act?
Q7) Provide three reasons why AIS threats are increasing.Briefly discuss each one.
Page 8
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Chapter 7: Infromation System Controls for Systems
Reliability
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Q1) What are the three fundamental information security concepts?
Q2) An electronic document that certifies the identity of the owner of a particular public key.
A)Asymmetric encryption
B)Digital certificate
C)Digital signature
D)Public key
Q3) Asymmetric key encryption combined with the information provided by a certificate authority allows unique identification of
A)the user of encrypted data.
B)the provider of encrypted data.
C)both the user and the provider of encrypted data.
D)either the user or the provider of encrypted data.
Q4) Describe four requirements of effective passwords
Q5) These are established to deal with major security breaches.
A)CERTs
B)CSOs
C)FIRSTs
D)Intrusion detection systems
Q6) What is a penetration test? Page 9
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Chapter 8: Auditing Computer-Based Information Systems
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Q1) These find processing errors.
A)Cross-footing balance test
B)File labels
C)Recalculation of batch totals
D)Write-protect mechanisms
Q2) Chaz Finnerty called the IT Help Desk in a huff."I'm trying to open an Excel file and I get a message that says that the file is locked for editing.What's going on?" The answer is that
A)the file is corrupted due to a computer virus.
B)there is no problem.Chaz is editing the file,so it is locked..
C)concurrent update controls have locked the file.
D)Chaz didn't open the file with the appropriate program.
Q3) Which of the following is not the objective of a disaster recovery plan?
A)Minimize the extent of the disruption,damage or loss.
B)Permanently establish an alternative means of processing information.
C)Resume normal operations as soon as possible.
D)Train employees for emergency operations.
Q4) Define and contrast a recovery point objective and a recovery time objective.
Q5) Identify four processing controls.
Q6) Identify four data entry controls.
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Chapter 9: Auditing Computer-Based Informtion Systems
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Q1) One type of audit that is concerned with the economical and efficient use of resources and the accomplishment of established goals and objectives corresponds to the fourth and fifth standards set forth by the IIA.This is known as a(n)__________ audit.
A)financial
B)information systems
C)internal control
D)operational or management
Q2) What is the primary purpose of computer audit software?
A)to free the auditor from the attest phase of the audit
B)to assist the auditor in reviewing and retrieving information in computer files
C)to look for unauthorized modifications and changes to system program code
D)to assist the auditor in reviewing and retrieving information in accounting records and systems documentation
Q3) Discuss the disadvantages of test data processing.
Q4) Name and briefly describe the different types of audits.
Q5) Why are audit tests and procedures performed on a sample basis?
Q6) Briefly describe tests that can be used to detect unauthorized program modifications.
Page 12
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Chapter 10: The Revenue Cycle: Sales an Cash Collections
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Q1) When customers send their remittances electronically to the company's bank,this is called
A)FEDI.
B)EFT.
C)to use procurement cards.
D)an electronic lockbox.
Q2) A __________ system spreads out the monthly statements to customers over the entire month with the idea being that the processing load and cash flow will be more even.
A)closed invoice
B)open invoice
C)cycle billing
D)balance forward
Q3) What is a CRM system?
Q4) A well-designed AIS should provide adequate controls to ensure that objectives in the revenue cycle are met.What are those objectives?
Q5) In billing and accounts receivable,what documents are commonly used?
Q6) Explain how validity checks,completeness tests and reasonableness tests can be users to ensure accuracy of customer ordes.
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Chapter 11: The Expenditure Cycle: Purchasing and Cash
Disbursements
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Q1) Which of the following is generally not shown on a receiving report?
A)price of the items
B)quantity of the items
C)purchase order number
D)counted and inspected by
Q2) What is not an advantage to using disbursement vouchers?
A)Disbursement vouchers reduce the number of checks written.
B)Disbursement vouchers can be prenumbered which simplifies the tracking of all payables.
C)Disbursement vouchers facilitate separating the time of invoice approval from the time of invoice payment.
D)There are no disadvantages to using disbursement vouchers.
Q3) In the expenditure cycle,the majority of payments made are by check.What are some control issues related to payment of vendors by check?
Q4) Define the materials requirement planning (MRP)
Q5) What is the EOQ approach? What are the components of EOQ?
Q6) Briefly discuss the differences among EOQ,MRP,and JIT.
Q7) a)What is the major cost driver in the purchasing function?
b)How can information technology be used to control this cost driver?
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Chapter 12: The Production Cycle
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Q1) The use of various forms of information technology in the production process is referred to as
A)computerized investments and machines.
B)computerized integration of machines.
C)computer-integrated manufacturing.
D)computer intense manufacturing.
Q2) For replacement of inventories and assets destroyed by fire or other disasters,an organization needs
A)stand-by facilities.
B)adequate insurance coverage.
C)source data automation.
D)All of the above are correct.
Q3) What role does the AIS play in the production cycle?
Q4) What is CIM?
Q5) What are the basic activities in a production cycle?
Q6) The expenses associated with quality assurance activities are ______ costs.
A)prevention
B)inspection
C)internal failure
D)external failure
Page 15
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Chapter 13: The Human Resources Managementpayroll Cycle
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Q1) What factors should be considered in outsourcing payroll to a payroll service bureau? Discuss the advantages and disadvantages of using a payroll service bureau to process a payroll.
Q2) Which of the following is a control that addresses the threat of payroll processing errors?
A)Field checks
B)Batch totals
C)Segregation of duties
D)Sound hiring procedures
Q3) Which type of payroll report includes the details of the current paycheck and deductions as well as year-to-date totals for each category?
A)payroll register
B)deduction register
C)earnings statement
D)federal W-4 form
Q4) What are the control objectives in an HRM/payroll cycle?
Q5) Define an HRM/payroll cycle.What are the basic activities in an HRM/payroll cycle?
Page 16
Q6) What are different types of deductions in payroll?
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Chapter 14: General Ledger and Reporting System
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Q1) What is data mining? Give an example of how it is used.
Q2) One way of ensuring that recurring adjusting journal entries that are needed each month are in fact made each month would be
A)to make all the entries a month in advance.
B)to rotate the responsibility among the accounting staff.
C)to program the entries to be made automatically.
D)to create a standard adjusting journal entry file.
Q3) Corrections are entries made to correct errors found in __________.
A)all journals.
B)special journals.
C)the general ledger.
D)the financial statements.
Q4) Which statement below about data warehouses and data marts is true?
A)The typical size of a data warehouse is small.
B)Data warehouses may replace the transaction processing databases of an organization.
C)A data warehouse or data mart complements the other databases within the organization by providing support for strategic decision making.
D)Data marts can be used for transaction processing.
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Chapter 15: Data Modeling and Database Design
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Q1) Identify the three basic rules that apply to the REA model pattern.
Q2) The groups of people about which an organization collects data to help it better plan,control,and evaluate performance of its basic business activities are the A)employees. B)events. C)agents. D)entities.
Q3) The REA data model supports both __________ and __________ types of data. A)financial; nonfinancial B)logical; physical C)planning; control D)traditional; nontraditional
Q4) The measure of how many instances of the other entity can be linked to one specific instance of a given entity is called A)a resource. B)a cardinality. C)an agent.
D)an exchange event.
Q5) What is an REA data model?
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Chapter 16: Implementing an Rea Model in a Relational Database
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Q1) In comparing the REA model to the traditional AIS,which of the following is false?
A)Traditional AISs contain only data about the financial aspects of transactions.
B)A major advantage of the REA data model is that it integrates non-financial and financial data in the AIS and makes both types of data easily accessible to management.
C)In the REA model,many financial statement items can be displayed by querying a single table.
D)Accounts in the traditional AIS are analogous to resources in the REA-based relational database.
Q2) Which type of relationship cardinality requires the implementation of a separate table?
A)1:0
B)1:1
C)1:N
D)M:N
Q3) Explain where in the REA model you can find the information normally found in a journal.
Q4) What kinds of databases can the REA data model be used to design?
Page 19
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Chapter 17: Special Topics in Rea Modeling
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Q1) What four main events of interest are included in a typical production cycle REA diagram?
Q2) The Interview event stores detailed data about each job interview.It is linked to the Hire Employees event in a(n)_____ relationship.
A)1:1
B)1:N
C)M:N
D)None of the above
Q3) The relationship between the Fill Customer Order and Ship Order events is 1-1.The minimum cardinalities reflect the fact that the two events are sequential.
A)0:N
B)1:1
C)1:N
D)M:N
Q4) Picking ticket number is most likely to be a primary key in:
A)Call on Customers
B)Fill Customer Order
C)Ship Order
D)Take Customer Order
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Chapter 18: Introduction to Systems Development and Systems Analysis
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Q1) Identify and briefly discuss the points at which a "go/no go" decision is made in the systems analysis process.
Q2) What are the objectives of a system survey?
Q3) Which of the following is the most important and frequently analyzed aspect of a feasibility study?
A)Economic feasibility
B)Technical feasibility
C)Legal feasibility
D)Scheduling feasibility
E)Operational feasibility
Q4) Which of the following aspect of a feasibility study is concerned with meeting external reporting requirements?
A)Economic feasibility
B)Technical feasibility
C)Legal feasibility
D)Scheduling feasibility
E)Operational feasibility
Q5) What are some of the reasons why behavioral problems occur when a new AIS is introduced?
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Chapter 19: Ais Development Strategies
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Q1) Which business process reengineering principle is applied when the traditional approvals for routine purchases are removed and replaced by users placing the orders themselves?
A)have output users perform the process
B)have those who produce the information process it
C)integration of parallel activities
D)organize around outcomes,not tasks
Q2) What is a help desk? What are the uses of a help disk?
Q3) Which statement below regarding prototyping is false?
A)A prototype is considered a "first draft," which is quickly and expensively built for testing purposes.
B)Developers who use prototyping still go through the SDLC.
C)It is easier for people to express what they like or dislike about a prototype than to imagine what they want in a system.
D)Prototyping allows developers to condense and speed up parts of the analysis and design phases.
Q4) Discuss how information system outsourcing can provide the organization with both a business solution and asset management.
Q5) Explain the concept of an application service provider.
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Chapter 20: Systems Design, Implementation and Operation
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Q1) Briefly discuss structured programming.
Q2) What is the name for the type of testing where copies of real transaction and file records are used rather than hypothetical ones?
A)acceptance testing
B)debugging
C)desk checking
D)program walk-through
Q3) Inadequate testing can lead to serious systems failures.Part of the SDLC process is to adequately test the system being implemented.What is the type of test that determines whether a program is operating as designed?
A)acceptance testing
B)debugging
C)processing of test transactions
D)program walk-through
Q4) What are the different types of documentation that should be prepared for a new system?
Q5) What is the objective of output design? What are the output design considerations? What are the various categories of outputs?
Q6) What are the different methods of testing a system?
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