Financial Information Systems
Chapter Exam Questions
Course Introduction
Financial Information Systems explores the integration of information technology and finance within organizations, focusing on the tools and systems that enable effective management and analysis of financial data. Students will examine topics such as financial databases, enterprise resource planning (ERP), accounting information systems, data security, and regulatory compliance. The course emphasizes the use of software applications for budgeting, forecasting, and financial reporting, as well as the role of information systems in supporting decision-making and strategic planning. Through case studies and hands-on projects, students will gain practical experience in designing, implementing, and evaluating financial information systems in real-world business environments.
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Accounting Information Systems 14th GLOBAL Edition by Marshall B. Romney
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Chapter 1: Conceptual Foundations of Accounting Information Systems
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Q1) How can an AIS add value to the organization?
Answer: An AIS can increase the efficiency and effectiveness of the value chain by improving the quality and lowering costs of products or services,improving efficiency of operations,improving decision making,enhancing the sharing of knowledge,improving the efficiency and effectiveness of its supply chain and improving the internal control structure.
Q2) A change in the AIS that makes information more easily accessible and widely available within an organization is most likely to first influence the A)organizational culture.
B)customer base.
C)external financial statement users.
D)production activity.
Answer: A
Q3) The primary objective of accounting is to
A)implement strong internal controls.
B)provide useful information to decision makers.
C)prepare financial statements.
D)ensure the profitability of an organization.
Answer: B
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Chapter 2: Overview of Transaction Processing and Enterprise Resource Planning Systems
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Q1) The data processing method used by FedEx to track packages is an example of A)real-time processing.
B)batch processing.
C)online batch processing.
D)real-time batch processing.
Answer: A
Q2) Pre-numbered shipping documents and pre-numbered invoices are examples of A)sequence codes.
B)block codes.
C)group codes.
D)mnemonic codes.
Answer: A
Q3) Issuing a purchase order is part of which transaction cycle?
A)the revenue cycle
B)the expenditure cycle
C)the human resources cycle
D)the production cycle
Answer: B
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Chapter 3: Systems Documentation Techniques
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Q1) Identify five important guidelines for drawing a DFD.Select one from your list and describe why it could be the most important one to consider when preparing a DFD.Support your choice with an example.
Answer: Understand the system.Ignore certain aspects of the system (such as control processes and control actions).Determine system boundaries.Develop a context diagram.Identify data flows.Group data flows.Identify transformation processes.Group transformation processes.Identify all files or data stores.Identify all data sources and destinations.All DFD elements are named.Subdivide the DFD.Give each process a sequential number.Repeat the process.Prepare a final copy.(Student answers will vary depending on the items chosen and the quality of their argument.The text provides various items that could be used to answer this question.)
Q2) The passage of the Sarbanes Oxley Act
A)made documentation skills even more important.
B)requires public companies to prepare an annual internal control report.
C)mandates that auditors must be able to prepare, evaluate and read documentation tools such as flowcharts.
D)All of the above.
Answer: D
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Chapter 4: Relational Databases
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Q1) In a well-structured database,the constraint that ensures the consistency of the data is known as the
A)entity integrity rule.
B)referential integrity rule.
C)unique primary key rule.
D)foreign key rule.
Q2) Explain the relational database data model.
Q3) The problem of losing desired information from a database when an unwanted record is purged from the database is referred to as the ________ anomaly.
A)purge
B)erase
C)delete
D)integrity
Q4) In the Inventory table above,"Item number" is best described as
A)an attribute.
B)a primary key.
C)a foreign key.
D)A, B, and C
Q5) Explain the types of attributes that tables possess in a relational database.
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Chapter 5: Computer Fraud
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Q1) 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)intentional acts (computer crimes)
Q2) ________ 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 all employees computer usage activities
C)Requiring all employees to take a fraud prevention awareness course
D)Explaining that fraud is illegal and will be severely punished to employees
Q3) Explain the impact of SAS No.99 on auditors' responsibilities.
Q4) Which of the following is not a way to improve fraud detection?
A)Install fraud detection software.
B)Implement a fraud hotline.
C)Employ a computer security officer.
D)Implement computer-based controls over input, processing, storage, and output activities.
Q5) What are the actions recommended by the Treadway Commission to reduce the possibility of fraudulent financial reporting?
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Chapter 6: Computer Fraud and Abuse Techniques
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Q1) The deceptive method by which a perpetrator gains access to the system by pretending to be an authorized user is called A)masquerading.
B)bluebugging.
C)eavesdropping.
D)podslurping.
Q2) Spyware that pops banner ads on a monitor,then collects information about the users web-surfing and spending habits is an example of A)a Trojan horse.
B)scareware.
C)adware.
D)a keylogger.
Q3) Computers that are part of a botnet and are controlled by a bot herder are referred to as A)sniffers.
B)zombies.
C)botsquats.
D)evil twins.
Q4) How can a system be protected from viruses?
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Chapter 7: Control and Accounting Information Systems
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Q1) The COSO Enterprise Risk Management Integrated Framework stresses that
A)risk management activities are an inherent part of all business operations and should be considered during strategy setting.
B)effective risk management is comprised of just three interrelated components; internal environment, risk assessment, and control activities.
C)risk management is the sole responsibility of top management.
D)risk management policies, if enforced, guarantee achievement of corporate objectives.
Q2) Preventive controls are usually superior to detective controls
A)True
B)False
Q3) Explain how a company could be the victim of fraud,even if ideal segregation of duties is enforced.
Q4) Which type of audits can detect fraud and errors?
A)External audits.
B)Internal audits.
C)Network security audits.
D)all of the above
Q5) Describe what is an event using the COSO definition and provide an example.
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Chapter 8: Controls for Information Security
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Q1) Identify six physical access controls.
Q2) Describe the steps in the security life cycle.
Q3) Describe the basic steps criminal use to attack an organization's information system.Select one of the steps and find a news story that relates to the step that you have chosen.
Q4) The ________ disseminates information about fraud,errors,breaches and other improper system uses and their consequences.
A)chief information officer
B)chief operations officer
C)chief security officer
D)computer emergency response team
Q5) Verifying the identity of the person or device attempting to access the system is an example of
A)authentication.
B)authorization.
C)identification.
D)threat monitoring.
Q6) Many corrective controls rely on human judgment.
A)True
B)False
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Chapter 9: Confidentiality and Privacy Controls
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Q1) If an organization asks you to disclose your social security number,but decides to use it for a different purpose than the one stated in the organization's privacy policies,the organization has likely violated which of the Generally Accepted Privacy Principles?
A)Collection.
B)Access.
C)Security.
D)Quality.
Q2) What confidentiality and security risk does using VoIP present to organizations?
A)Internet e-mail communications can be intercepted.
B)Internet photographs can be intercepted.
C)Internet video can be intercepted.
D)Internet voice conversations can be intercepted.
Q3) 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.
Q4) Compare the advantages and disadvantage of symmetric and asymmetric encryption.
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Chapter 10: Processing Integrity and Availability Controls
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Q1) To protect against malware,it is important that antivirus software automatically examine ________ introduced into a system.
A)CDs
B)e-mail
C)flash drives
D)all of the above
Q2) The best example of an effective payroll transaction file financial total would most likely be
A)sum of net pay.
B)total number of employees.
C)sum of hours worked.
D)total of employees' social security numbers.
Q3) All of the following controls for online entry of a sales order would be useful except
A)check digit verification on the dollar amount of the order.
B)validity check on the inventory item numbers.
C)field check on the customer ID and dollar amount of the order.
D)concurrent update control.
Q4) Discuss ways that can help ensure the processing integrity of electronic voting.
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Chapter 11: Auditing Computer-Based Information Systems
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Q1) What is a test data generator?
A)It is an application that records how well systems personnel have performed on company competency examinations.
B)It is an application that prepares data that can be used for auditing the effectiveness of computer processing.
C)It is an application that records which professional examinations systems personnel have obtained.
D)It is a backup generator application that can be used to generate data if the original storage device fails.
Q2) The auditor's objective is to seek ________ that no material error exists in the information audited.
A)absolute reliability
B)reasonable objectivity
C)reasonable evidence
D)reasonable assurance
Q3) Explain why the auditor's role in program development and acquisition should be limited.
Q4) Describe the five commonly used concurrent audit techniques.
Q5) Describe how audit evidence can be collected.
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Chapter 12: The Revenue Cycle: Sales to Cash Collections
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Q1) Explain how to effectively segregate duties in the sales order activity.
Q2) Laz Chance wears roller blades and headphones when he is at work at the Squishy Things Toy Company.He is a product packer.The headphones give him computer-generated instructions so he knows the location of each item and quantity that should be included in the order.These instructions are the equivalent of a A)picking ticket.
B)bill of lading.
C)packing slip.
D)sales order.
Q3) Bogumil Distributors is an Internet-based wholesaler.Customers enter their orders online.The manager of Cezary Foods was entering an order when the following error message popped up: "Your order exceeds your available credit.You will be contacted within 8 hours." This message is the result of a A)sign check.
B)validity check.
C)reasonableness test. D)limit check.
Q4) Describe cycle billing and identify how an organization might benefit by using cycle billing.
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Chapter 13: The Expenditure Cycle: Purchasing to Cash
Disbursements
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Q1) Which of the following controls can minimize the threat of stockouts and excess inventory?
A)The use of positive pay.
B)Do not inform receiving employees about quantity ordered.
C)The use of ERS.
D)Perpetual inventory system.
Q2) What types of decision-making and strategic information should the AIS provide in the expenditure cycle?
Q3) Ngai Nhung is the sales manager at Hung Technologies.At lunch with the company CEO,Ngai proudly announced that he had received a ________ from a client.The client had just requested a large quantity of components from Hung.
A)blanket purchase order
B)voucher
C)purchase order
D)purchase requisition
Q4) The EOQ approach to managing inventory has been gaining popularity in recent years.
A)True
B)False
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Chapter 14: The Production Cycle
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Q1) Which of the following organization controls should be implemented and maintained to counteract the general threat that the loss of production data will greatly slow or halt production activity?
A)Store key master inventory and production order files on-site only to prevent their theft.
B)Back up data files only after a production run has been physically completed.
C)Access controls should apply to all terminals within the organization.
D)Allow access to inventory records from any terminal within the organization to provide efficient data entry.
Q2) The risks associated with over-production are likely of greatest concern to which company below?
A)a cereal manufacturer
B)a manufacturer that produces designer clothing
C)a manufacturer of printer paper
D)a mailbox manufacturer
Q3) Implementing a modern costing approach often results in short-term declines in profitability.
A)True
B)False
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Chapter 15: The Human Resources Management and Payroll Cycle
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Q1) Which type of payroll report lists the voluntary deductions for each employee?
A)Payroll register.
B)Deduction register.
C)Employee earnings statement.
D)Federal W-4 form.
Q2) Identify the two types of payroll deductions and give two examples of each type.
Q3) A growing number of companies require some of their upper level executives to spend time performing job duties of rank-and-file employees.When the vice president of DaVita Inc.,a major provider of dialysis treatment,spent three days working in one of the company's clinics,she understood
A)that the company's polyester uniform caused her to sweat a great deal.
B)evidence of fraud in several clinic locations.
C)how the need to respond to life-threatening emergencies can result in delays in completing corporate-mandated reports.
D)situations where employees were treating customers properly.
Q4) What controls are available to address the threat of payroll errors?
Q5) Describe the basic activities in an HRM/payroll cycle.
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Q6) Explain benefits to companies and to employees using electronic direct deposit for payroll.
Chapter 16: General Ledger and Reporting System
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Q1) If you believe not all adjusting entries were posted in the general ledger,you should prepare a general ledger control report listing journal vouchers in A)numerical sequence.
B)chronological order.
C)general ledger account number order.
D)any order, since you have to review them all anyway.
Q2) 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.
Q3) Which of the following controls can minimize the threat of inaccurate or invalid general ledger data?
A)Training and experience in applying IFRS and XBRL.
B)Responsibility accounting.
C)Backup and disaster recovery procedures.
D)Restriction of access to general ledger.
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Chapter 17: Database Design Using the Rea Data Model
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Q1) Which of the following statements about REA modeling and REA diagrams is false?
A)REA is an acronym for Resources, Entities, and Agents.
B)REA data modeling does not include traditional accounting elements such as ledgers, chart of accounts, debits and credits.
C)REA data modeling could be referred to as an events-based model.
D)REA diagrams must include at least two activities, which together represent a give-get economic exchange.
Q2) Describe what is a E-R diagram and provide an example.
Q3) Describe the three basic rules that apply to the REA model pattern.
Q4) In which stage(s)of the database design process is the completed data model used?
A)only in the systems analysis stage
B)only in the conceptual design stage
C)in both the systems analysis and design stages
D)neither the systems analysis nor the design stages
Q5) Describe data modeling.
Q6) Define cardinality.
Q7) Explain specifically what is meant by the following statement: "Accountants can and should participate in all stages of the database design process."
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Chapter 18: Implementing an Rea Model in a Relational Database
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Q1) Which of the statements below is false with regards to creating database tables from an REA diagram?
A)M:N relationships must be implemented as separate tables.
B)1:N relationships are implemented with the primary key of the 1 side becoming a foreign key on the N side.
C)1:1 relationships are implemented with the primary key of either entity included as a foreign key in the table representing the other entity.
D)All of the above are true.
Q2) Because information about temporal imbalances between two ________,such as accounts receivable and accounts payable,is needed so frequently,such calculated values are sometimes stored as ________ in the appropriate tables.
A)events; agents
B)events; attributes
C)resources; agents
D)resources; attributes
Q3) Explain where in the REA model you can find the information normally found in a journal.
Q4) What are the advantages of the REA data model over the traditional AIS model?
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Chapter 19: Special Topics in Rea Modeling
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Q1) Why might an REA diagram show relationships between resources and agents?
Q2) Information about job roles is simply another ________ in the Employee table. A)resource
B)event
C)agent
D)attribute
Q3) Employees and Training entities is ________ ,because a given employee will,over time,attend numerous training courses and,conversely,several employees may attend the same specific training class.
A)1:1
B)1:N
C)M:N
D)1:M
Q4) Digital assets will affect the REA models of the revenue and expenditure cycles.
A)True
B)False
Q5) Why might an REA diagram show relationships between agents?
Q6) Why is the event Issue Debt often modeled as a separate event entity?
Q7) Why is cost information stored in several relational tables?
Q8) What are the benefits of an integrated enterprise-wide data model?
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Chapter 20: Introduction to Systems Development and Systems Analysis
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Q1) Who is responsible for ensuring that the new system will meet the needs of users?
A)Accountants.
B)System programmers.
C)The project development team.
D)System analysts.
Q2) Which group of individuals listed below can be the most effective in generating employee support and encouraging the development and acceptance of an AIS project?
A)Accountants.
B)Information systems steering committee.
C)Management.
D)Project development team.
Q3) It is most difficult to quantify ________ when assessing economic feasibility.
A)benefits
B)costs
C)the payback period
D)break even
Q4) Describe the five phases of systems analysis.
Page 22
Q5) Describe what is a Gantt chart and both of its advantage and disadvantage.
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Chapter 21: Ais Development Strategies
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Q1) Describe the purposes of a help desk.
Q2) Which of the following is not true about business process management (BPM)and enterprise resource planning (ERP)systems?
A)ERP systems encompass all functions and processes in an organization, but BPM systems are implemented at process or unit levels in an organization.
B)BPM systems are process-centered, but ERP systems are data-centered.
C)Organizations can use both ERP and BPM systems at the same time.
D)ERP and BPM systems rely heavily on technology for communication and coordination.
Q3) The unauthorized disclosure of sensitive information is an example of what risk associated with outsourcing?
A)A locked-in system.
B)A loss of control.
C)A reduced competitive advantage.
D)Inflexibility.
Q4) Explain the importance of using a request for proposal.
Q5) Describe the important characteristics of extreme programming (XP).
Q6) Discuss how an organization can develop custom software.
Q7) Explain the concept of an application service provider.
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Chapter 22: Systems Design, implementation, and Operation
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Q1) What of the below is the most time-consuming activity in the physical design stage of the systems development life cycle (SDLC)?
A)Controls design.
B)Input design.
C)Output design.
D)Program design.
Q2) Describe the post-implementation review activity.
Q3) Physical input design considerations include
A)which transactions to enter.
B)layout of source documents.
C)types of data input and optimal input methods.
D)cost of collecting and storing data.
Q4) What are the factors that an organization needs to investigate during its postimplementation review?
Q5) Describe the conceptual systems design phase and identify the elements of conceptual design specifications.
Q6) What output design considerations should be analyzed as part of the physical system design phase?
Q7) Describe the standards that should be used to evaluate design alternatives.
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