Information Systems Controls and Auditing Chapter Exam Questions
Course Introduction
Information Systems Controls and Auditing delves into the principles, frameworks, and practices necessary to ensure the integrity, security, and reliability of information systems within organizations. The course covers topics such as risk assessment, control mechanisms, audit planning, regulatory compliance (such as SOX and COBIT), and the application of audit tools and techniques to evaluate information systems processes. Students learn to design, implement, and assess controls that safeguard data and systems, as well as investigate and report on system vulnerabilities and compliance gaps. Through case studies and hands-on exercises, the course equips students with the technical and analytical skills required to conduct effective audits and support organizational governance.
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Accounting Information Systems 10th Edition by James A. Hall
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Page 2
Chapter 1: The Information System: an Accountants Perspective
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Q1) A balance sheet prepared in conformity with GAAP is an example of discretionary reporting.
A)True
B)False
Answer: False
Q2) Several advantages of cloud computing have been discussed.Discuss at least three.
Answer: The advantages of cloud computing include access to whatever computing power it needs,paying only for what is used,and flexible and relatively short-term computing contracts.
Q3) Systems maintenance consumes the majority of a system's total costs.
A)True
B)False
Answer: True
Q4) A database is a collection of interconnected computers and communications devices that allows users to communicate,access data and applications,and share information and resources.
A)True
B)False
Answer: False
Page 3
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Chapter 2: Introduction to Transaction Processing
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Q1) Explain how a hashing structure works and why it is quicker than using an index.Give an example.If it so much faster,why isn't it used exclusively?
Answer: A hashing structure typically works by taking a key value and using it to divide a prime number.The result is a unique number almost all of the time if enough decimal places are used.The resulting numbers are used to find the unique location of the record.Calculating a record's address is faster than searching for it through an index,therefore the principal advantage of hashing is access speed.It is not used exclusively because it does not use the storage disk efficiently.Some disk locations will never be selected because they do not correspond to legitimate key values.Also,different record keys may sometimes translate to the same address and data collision could occur.A way around this exists using pointers,but the additional pointers slow down the system.
Q2) Most organizations have replaced the general journal with a
Answer: journal voucher system
Q3) List two of the three transaction cycles.
Answer: expenditure cycle,conversion cycle,revenue cycle
Q4) Give a specific example of a turnaround document.
Answer: credit card,electricity,water,or telephone bill,etc.
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Chapter 3: Ethics,fraud,and Internal Control
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Sample Questions
Q1) Name four input controls and describe what they test.
Answer: 1.Numeric-alphabetic checks look for the correct type of character content in a field,either numbers or letters.
2.Limit checks verify that values are within preset limits.
3.Range checks verify that values fall within an acceptable range.
4.Reasonableness check determines if a value in one field,which has already passed a limit check and a range check,is reasonable when considered along with data in other fields of the record.
Q2) Explain the pay-and-return scheme.
Answer: A pay-and-return scheme involves a clerk with check-writing authority who pays a vendor twice for the same products (inventory or supplies)received.The vendor,recognizing that its customer made a double payment,issues a reimbursement to the victim company.The clerk intercepts and cashes the reimbursement check.
Q3) All of the following are conditions for fraud except
A)false representation
B)injury or loss
C)intent
D)material reliance
Answer: D
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Page 5
Chapter 4: The Revenue Cycle
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Sample Questions
Q1) Integrated accounting systems automatically transfer data between modules.
A)True
B)False
Q2) What is the purpose of the credit memo?
Q3) Multilevel security employs programmed techniques that permit simultaneous access to a central system by many users with different access privileges but allows them to obtain information for which they lack authorization.
A)True
B)False
Q4) For the revenue cycle,state two specific independent verifications that should be performed.
Q5) Describe the key tasks in the sales order process.
Q6) Which control does not help to ensure that accurate records are kept of customer accounts and inventory?
A)reconcile accounts receivable control to accounts receivable subsidiary
B)authorize credit
C)segregate custody of inventory from record keeping
D)segregate record keeping duties of general ledger from accounts receivable
Q7) Distinguish between a packing slip,shipping notice,and a bill of lading.
Page 6
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Chapter 5: The Expenditure Cycle Part I: Purchases and Cash Disbursements Procedures
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Q1) The general ledger function receives the AP account summary from cash disbursements.
A)True
B)False
Q2) Describe four tasks the receiving computer application performs automatically in the integrated purchases processing system.
Q3) If a company uses an actual cost system,inventory records can first be updated from the
A)vendor invoice
B)purchase order
C)receiving report
D)purchase requisition
Q4) When goods are received,the receiving clerk sends copies of the receiving report to the inventory control clerk and the AP clerk.
A)True
B)False
Q5) Explain the role that the GL plays in reducing the risk of inaccurately recording transactions in journals and ledgers.
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Q6) Explain how a voucher payable system works.How is the balance of AP determined?
Chapter 6: The Expenditure Cycle Part II: Payroll Processing and
Fixed Asset Procedures
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Q1) Work-in-process records are updated by payroll personnel.
A)True
B)False
Q2) An important reconciliation in the payroll system is
A)general ledger compares the labor distribution summary from cost accounting to the disbursement voucher from accounts payable
B)personnel compare the number of employees authorized to receive a paycheck to the number of paychecks prepared
C)production compares the number of hours reported on job tickets to the number of hours reported on time cards
D)payroll compares the labor distribution summary to the hours reported on time cards
Q3) Which control is not a part of the fixed asset system?
A)formal analysis of the purchase request
B)review of the assumptions used in the capital budgeting model
C)development of an economic order quantity model
D)estimates of anticipated cost savings
Q4) Discuss outsourcing the payroll function.What are the advantages and risks?
Q5) List four types of data that appear on a depreciation schedule.
Page 8
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Chapter 7: The Conversion Cycle
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Q1) Which of the following would not be included as a value stream cost?
A)Labor costs of employees who simply transport the product from cell to cell.
B)Labor costs of employees who design the product.
C)A charge per square foot for the value stream production facility including cost of rent and building maintenance.
D)All of the above are value stream costs.
Q2) Cement and petrochemicals are produced by the batch manufacturing method.
A)True
B)False
Q3) The inventory control function updates and maintains both raw materials and finished goods inventory subsidiary ledgers.
A)True
B)False
Q4) The philosophy of customer satisfaction permeates the world-class firm.
A)True
B)False
Q5) Itemize the disadvantages of ABC that have caused some firms to abandon this technique.
Q6) In activity-based costing,distinguish between activities and cost objects.
Page 9
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Chapter 8: Financial Reporting,and Management Reporting Systems
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Sample Questions
Q1) Explain the purpose and contents of the general ledger master file.
Q2) Management reporting is often called discretionary reporting because,unlike financial reporting,it is not mandated.
A)True
B)False
Q3) Which situation indicates an internal control risk in the general ledger/financial reporting systems (GL/FRS)?
A)the employee who maintains the cash journal computes depreciation expense
B)the cash receipts journal voucher is approved by the Treasurer
C)the cash receipts journal vouchers are prenumbered and stored in a locked safe
D)the employee who maintains the cash receipts journal records transactions in the accounts receivable subsidiary ledger
Q4) Firms use prescriptive analytics to recommend the best action to take in response to a specific question.
A)True
B)False
Q5) Define and discuss the journal voucher.
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Q6) Describe at least three characteristics of strategic planning decisions and their information requirements.
Chapter 9: Database Management Systems
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Q1) Define repeating groups,partial dependencies and transitive dependencies and discuss how they are dealt with in the process of normalizing tables.
Q2) Data currency is preserved in a centralized database by
A)partitioning the database
B)using a lockout procedure
C)replicating the database
D)implementing concurrency controls
Q3) The normalization process involves identifying and removing structural dependencies from the tables being modeled.
A)True
B)False
Q4) What is the insertion anomaly?
Q5) If an organization uses a commercial database management system,its systems developers will likely use a bottom-up approach to data modeling.
A)True
B)False
Q6) _________________________ occurs when a specific file is reproduced for each user who needs access to the file.
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Chapter 10: The Rea Approach to Business Process
Modeling
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Q1) REA diagrams include all of the following entities except A)support events
B)economic events
C)internal agents
D)users
Q2) Which of the following associations would most likely describe the relationship between an internal agent and an economic event?
A)1:M
B)1:1
C)0:M
D)none of the above
Q3) Define view integration?
Q4) The letters 'R,' 'E,' and 'A' in the term "REA model" stand for resources,events,and actions.
A)True
B)False
Q5) How does the REA approach improve efficiency?
Q6) Describe the rule for assigning foreign keys in a (1:1)association
Q7) Define duality.
Q8) What are support events? Page 12
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Chapter 11: Enterprise Resource Planning Systems
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Q1) Which of the following statements is least likely to be true about a data warehouse?
A)It is constructed for quick searching and ad hoc queries.
B)It was an original part of all ERP systems.
C)It contains data that are normally extracted periodically from the operating databases.
D)It may be deployed by organizations that have not implemented an ERP.
Q2) What should management do to assess the potential benefits from implementing an ERP?
Q3) What is meant by the OLAP term: drill-down?
Q4) What is meant by the OLAP term: slicing and dicing?
Q5) What is bolt-on software?
Q6) Why does the data warehouse need to be separate from the operational databases?
Q7) Supply chain management software
A)is typically under the control of external partners in the chain
B)links all of the partners in the chain, including vendors, carriers, third-party firms, and information systems providers
C)cannot be integrated into an overall ERP
D)none of the above
Q8) Define OLAP and give some examples.
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Chapter 12: Electronic Commerce Systems
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Sample Questions
Q1) Describe the basic differences between the star,ring,and bus topologies.
Q2) A certification authority is an independent and trusted third party empowered with responsibility to vouch for the identity of organizations and individuals engaging in Internet commerce.
A)True
B)False
Q3) Network protocols fulfill all of the following objectives except
A)facilitate physical connection between network devices
B)provide a basis for error checking and measuring network performance
C)promote compatibility among network devices
D)creation of inflexible standards
Q4) The standard format for an e-mail address is DOMAIN NAME@USER NAME. A)True
B)False
Q5) The provision of computing power and disk space to client firms who access it from desktop PCs is known as
A)computing-as-a-service
B)infrastructure-as-a-service
C)platform-as-a-service
D)software-as-a-service
Page 15
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Chapter 13: Managing the Systems Development Life Cycle
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Q1) A cost-benefit analysis is a part of the detailed
A)operational feasibility study
B)schedule feasibility study
C)legal feasibility study
D)economic feasibility study
Q2) Systems analysis involves all of the following except
A)gathering facts
B)surveying the current system
C)redesigning bottleneck activities
D)reviewing key documents
Q3) Intangible benefits
A)are easily measured
B)are of relatively little importance in making information system decisions
C)are sometimes estimated using customer satisfaction surveys
D)when measured, do not lend themselves to manipulation
Q4) Discuss the documentation requirements of systems designers and programmers,computer operators,and end users.
Q5) All vendor-supported systems include software,infrastructure,and maintenance.
A)True
B)False
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Chapter 14: Auditing It Controls Part I: Sarbanes-Oxley and It Governance
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Q1) Scavenging is a form of fraud in which the perpetrator uses a computer program to search for key terms in a database and then steal the data.
A)True
B)False
Q2) What is the empty shell?
Q3) What approach to the design and assessment of controls is recommended by PCAOB Auditing Standard No.5?
Q4) Corporate management (including the CEO)must certify monthly and annually their organization's internal controls over financial reporting.
A)True
B)False
Q5) For disaster recovery purposes,what criteria are used to identify an application or data as critical?
Q6) What is an auditor looking for when testing computer center controls?
Q7) Explain why reduced security is an outsourcing risk.
Q8) Define fault tolerance.
Q9) The distributed data processing approach carries some control implications of which accountants should be aware.Discuss two. Page 17
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Chapter 15: Auditing It Controls Part II: Security and Access
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Q1) Disguising message packets to look as if they came from another user in order to gain access to the host's network is called spooling.
A)True
B)False
Q2) A formal log-on procedure is the operating system's last line of defense against unauthorized access.
A)True B)False
Q3) Explain how the one-time password approach works.
Q4) Electronic data interchange customers may be given access to the vendor's data files.
A)True
B)False
Q5) What is deep packet inspection?
Q6) What is EDI? How does its use affect the audit trail?
Q7) The database management system controls access to program files. A)True B)False
Q8) What problem is common to all private key encryption techniques?
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Chapter 16: Auditing It Controls Part III: Systems
Development, program Changes, and Application Auditing
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Q1) Maintenance access to systems increases the risk that logic will be corrupted either by accident or intent to defraud.
A)True
B)False
Q2) A salami fraud affects a large number of victims,but the harm to each appears to be very small.
A)True
B)False
Q3) All of the following are advantages of the test data technique except
A)auditors need minimal computer expertise to use this method
B)this method causes minimal disruption to the firm's operations
C)the test data is easily compiled
D)the auditor obtains explicit evidence concerning application functions
Q4) The user test and acceptance procedure is the last point at which the user can determine the system's acceptability prior to it going into service.
A)True
B)False
Q5) What are program version numbers and how are they used?
Q6) Describe and contrast the test data method with the integrated test facility.
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