ACCT 326 Accounting Information Systems Final Exam Spring 2013

Instructions:

This exam contains 20 multiple-choice questions (worth 1.5 points each) and one exercise (worth 10 points). The exam must be completed individually. Please record your answers in the Word file provided. Please submit your Word file in the Assignments folder by Sunday, March 10. Best of luck!

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Multiple-Choice Questions 1. The primary objective of accounting is to A) implement strong internal controls. B) prepare financial statements. C) ensure the profitability of an organization. D) provide useful information to decision makers. 2. An accounting information system (AIS) processes ________ to provide users with ________. A) information; data B) data; transactions C) data; benefits D) data; information 3. 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 4. Which of the following is not true about the accounts receivable subsidiary ledger? A) The subsidiary ledgers play an important role in maintaining the accuracy of the data stored in the AIS. B) Debits and credits in the subsidiary ledger must always equal. C) The total of the subsidiary ledgers must equal the control account. D) Every credit sale is entered individually into the subsidiary ledger. 5. The general ledger A) summarizes the transactions in journals. B) only includes balance sheet accounts. C) is the initial place to record depreciation expense. D) is posted in total to the general journal. 6. The chart of accounts of a corporate retail bookstore would probably include A) a drawing account. B) work-in-process inventory. C) retained earnings. D) both A and C 7. A control procedure designed so that the employee that records cash received from customers does not also have access to the cash itself is an example of a(n) A) preventive control. B) authorization control. C) detective control. D) corrective control.

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8. One of the objectives of the segregation of duties is to A) make sure that different people handle different parts of the same transaction. B) ensure that no collusion will occur. C) achieve an optimal division of labor for efficient operations. D) make sure that different people handle different transactions. 9. According to The Sarbanes-Oxley Act of 2002, the audit committee of the board of directors is directly responsible for A) hiring and firing the external auditors. B) overseeing day-to-day operations of the internal audit department. C) performing tests of the company's internal control structure. D) certifying the accuracy of the company's financial reporting process. 10. Accounting recognizes a sale when A) cash is received from the customer. B) inventory is removed from the warehouse. C) inventory becomes the legal property of the customer. D) a sales order is approved by sales, inventory control, and credit departments. 11. Which of the following would be the least effective control to minimize the loss of inventory? A) Periodically back up all perpetual inventory records. B) Reconcile the physical counts with and perpetual records. C) Secure the storage location of inventory. D) Release inventory only with proper documentation. 12. Which of the following duties could be performed by the same individual and not violate segregation of duty controls? A) issuing credit memos and maintaining customer accounts B) handling cash receipts and mailing vendor payments C) handling cash and authorizing credit memos D) handling cash and posting to customer accounts 13. The traditional approach to inventory management to ensure sufficient quantity on hand to maintain production is known as A) just-in-time production. B) optimal inventory quantity. C) economic order quantity. D) safety stock. 14. The need to place an order for inventory is specified by the A) stockout point. B) reorder point. C) economic order quantity. D) company inventory policies. 15. What is a key feature of materials requirements planning (MRP)? A) minimize or entirely eliminate carrying and stockout costs B) reduce required inventory levels by scheduling production rather than estimating needs C) determine the optimal order size D) determine the optimal reorder point
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16. In an Activity-Based Costing (ABC) system, a cause-and-effect relationship is known as a A) cost stimulator. B) overhead stimulator. C) cost catalyst. D) cost driver. 17. Wee Bee Trucking determines the cost per delivery by summing the average cost of loading, unloading, transporting, and maintenance. This is an example of ________ costing. A) process B) job-order C) activity-based D) unit-based 18. Which activity below is not performed by the HRM? A) compensation B) recruitment and hiring C) discharge D) training 19. The general ledger system of an organization should be designed to serve the information requirements of both internal and external users. This means that the system should support A) producing expansive regular periodic reports to cover all information needs. B) producing regular periodic reports and respond to real-time inquiry needs. C) the real-time inquiry needs of all users. D) access by investors and creditors of the organization to general ledger balances. 20. Adjusting entries that reflect events that have already occurred, but for which no cash flow has taken place are classified as A) revaluations. B) deferrals. C) corrections. D) accruals.

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Exercise Following are ten internal control failures related to the revenues and cash collection processes. 1. _____ A customer ordered 12 boxes of your product (total of 144 items) for express shipment. Your data entry clerk inadvertently entered 12 individual items. 2. _____ You enter sales and accounts receivable data in batches at the end of each week. Several problems have resulted recently as a result of recording invoices to the wrong customer account. 3. _____ In an effort to boost sales, you obtain some of the stock of unissued shipping reports and create a dozen fictitious shipments. You submit these documents to the billing department for invoicing. 4. _____ Checks are received by the mailroom and then forwarded to the accounts receivable department for recording. The accounts receivable clerk holds the checks until the proper customer account has been identified and reconciled. 5. _____ Several shipping reports have been misplaced en route to the billing department from the shipping department. 6. _____ Several sales transactions were not invoiced within the same month as the related shipment. 7. _____ A sales clerk entered a non-existent date in the computer system. The system rejected the data and the sales were not recorded. 8. _____ Upon entering sales orders in your new computer system, a sales clerk mistakenly omitted customer numbers from the entries. 9. ______ A computer programmer altered the electronic credit authorization function for a customer company owned by the programmers cousin. 10. _____ Customer orders were lost in the mail en route from the sales office to the accounting department (located at the companys headquarters). Required:

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Select one internal control from the following list that would be most effective in the prevention of the failure. Indicate the letter of the control next to each failure above. Letters should not be used more than once and some letters may not be used at all. a. b. c. d. e. f. g. h. i. j. k. l. m. n. o. p. q. Pre-formatted data entry screens Pre-numbered documents Programmed edit checks 100% check for matching of customer orders and sales orders 100% check for matching of sales orders, pick list, and packing slips 100% check for matching of sales orders and invoices 100% check for matching of deposit slip and customer check. Prompt data entry immediately upon receipt of customer order Customer verification Independent authorization for shipments Independent authorization for billing Reasonableness check Hash totals Data back-up procedures Program change controls Sequence verification Periodic confirmation of customer account balances

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