Chapter 1

Accounting Information Systems and the Accountant

True-False Questions
1. The acronym AIS stands for Accounting Information Standards.
2. Accounting information systems must be computerized to be effective.
3. It is best to view an AIS as an accounting system that must be computerized.
4. AISs often create information that is useful to non-accountants.
5. In order to be useful raw accounting data must be processed by a computer.
6. The path that data follow in an AIS for e!ample from manual source document to
completed output report is called an audit trail.
7. A company"s audit trail is normally easier to follow under a manual data processing
system compared to a computerized information processing system.
8. The starting point for an audit trail of a payroll system might be an employee time card.
9. The starting point for an audit trail of a production department might be the purchase of
raw materials.
10. The acronym #$% stands for electronic reporting plan.
11. The term information overload refers to providing too much data to management often
resulting in managers ignoring it.
12. An advantage of computerized AISs is that they do not need to be programmed to catch
simple input errors such as entering &.' instead of &'.' for hours wor(ed in a payroll
application.
13. )omputers tend to ma(e audit trails easier to follow because everything is computerized.
14. The acronym #$% stands for enterprise reporting system.
15. The authors consider accountants to be (nowledge wor(ers.
16. %redictive analytics use large data warehouses to help organizations improve
performance.
17. As used in this chapter the acronym SA$ stands for suspicious accounting reports.
18. Sections of the %atriot Act mandate suspicious activity reporting.
19. *ne of the motivations for SA$ is to identify money laundering activities.
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20. The term %atriot is an acronym for providing appropriate tools re-uired to intercept
and obstruct terrorism.
21. Section ./0 of the %atriot Act re-uires auditors to verify that their organizations have
ade-uate ris( assessment systems.
22. Accounting systems are useful for performing accounting tas(s but cannot be used for
such security purposes as countering terrorism.
23. The Sarbanes-*!ley Act includes a provision that prohibits corporations from ma(ing
personal loans to e!ecutives.
24. The Sarbanes-*!ley Act prohibits companies from using the same auditing firms for
performing both auditing and management consulting services.
25. As a result of corporate ban(ruptcies in 0''0 some of the largest public accounting
firms are no longer engaged in any consulting wor(.
26. A ma1or output of financial accounting is the preparation of financial statements such as
an income statement.
27. The series of steps leading from data recorded in transaction records to the information
reported on financial statements is called the accounting cycle.
28. AISs are only concerned with financial information.
29. *ne ma1or difference between financial accounting and managerial accounting is that
financial accountants prepare financial statements for e!ternal investors while
managerial accountants prepare financial statements for internal managers.
30. In a responsibility accounting system every person within a company ta(es
responsibility for the performance of every business unit.
31. *ne ma1or difference between financial accounting and managerial accounting is that
financial accountants use dashboards while managerial accountants do not.
32. An e!ample of a financial report that would be prepared by a managerial accountant
2instead of a financial accountant3 is a budget report.
33. 4+$5 is a business reporting language that is used to define interactive financial data.
34. )ost accounting tas(s are usually performed by financial accountants.
35. An A+) inventory system refers to an activity-based costing system.
36. As used in chapter , the term dashboard refers to a -uic( and easy plan to install a
computerized accounting system in an organization.
37. As used in )hapter , a dashboard is an up-to-the-minute graphic depiction of one or
more business activities.
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38. The purpose of the assurance services of an accounting firm is to give a company6s
managers moral support when they are audited by the federal or state government.
39. The purpose of )%A Trust Services is to provide assurance that a company engaged in
electronic commerce can provide the goods or services it promises.
40. An e!ample of a value-added reseller 27A$3 is a computer dealer that adds software to
the hardware it sells.
41. Some possible career opportunities for AIS ma1ors or minors include consulting
positions computerized auditing or system computer auditing positions.
42. Accountants are usually classified as line wor(ers within business organizations.
43. Today"s AIS is an enterprise-wide information system that focuses on interdepartmental
business processes.
44. 8anagerial accounting principally provides decision-ma(ing information to a company"s
internal managers.
45. As a result of computerized information processing systems in many organizations
today the need for accountants in these organizations has significantly declined.
46. Activity-based costing systems focus on allocating overhead on the basis of direct labor
hours used.
47. +ecause accountants are not normally computer programmers wor(ing within the
information processing subsystem it is unnecessary for them to understand the
capabilities and limitations of computers.
48. 9ithin the traditional AIS a sales order would not be considered an accounting
transaction.
49. Students ma1oring in AIS are unli(ely to assume 1obs in traditional accounting positions
because they (now too much.
50. There are limited career opportunities available for students who study both accounting
and information systems.
51. *ne possible career for AIS ma1ors is in the traditional area of financial or managerial
accounting.
/0. The )ISA is an acronym for a professional accounting certification.
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Multiple-Choice Questions
/.. The S in the acronym AIS stands for:
a3 Standard
b3 System
c3 Symbol
d3 none of these
/&. 9hich of the following is true;
a3 An AIS must be computerized to be useful
b3 An AIS always produces useful information
c3 An AIS always produces financial information
d3 none of these
//. The letter % in the acronym #$% stands for:
a3 %roduction
b3 %lanning
c3 %ro1ect
d3 none of these
/<. 9hich of the following is true about the terms data and information within the conte!t
of )hapter ,;
a3 These terms are e!actly the same
b3 These terms are e!act opposites
c3 Some data can also be information
d3 none of these
/=. If a manager suffers information overload:
a3 >e or she must press the reset button on his or her computer
b3 It means that this person needs a larger hard drive
c3 The information is really 1ust data
d3 >e or she must forget some facts in order to remember others
/?. 9hich of the following captures the same idea as the term @I@*;
a3 )omputers cannot turn straw into gold
b3 Too much information is the same as garbage
c3 @reat investments lead to great returns
d3 Too many coo(s spoil the broth
/A. 9hich of the following best describes a data warehouse as discussed in )hapter ,;
a3 A repository of historical information from one accounting application
b3 A repository of historical information from a set of accounting applications
c3 A repository of information from many business applicationsBsome not
accounting
d3 A repository of information from many businesses in the same industry
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<'. 8ost AISs perform all of these functions except:
a3 )ollect raw accounting data
b3 Store accounting data for future uses
c3 %rocess data into useful information
d3 AISs perform all of these functions
<,. As used in the chapter (nowledge wor(ers:
a3 Are blue collar wor(ers in non-managerial positions
b3 Are the same as delivery cler(s
c3 Include most accountants
d3 Coes not include most accountants
<0. All of the following are possible uses of AIS or accounting personnel that were discussed
in the chapter except:
a3 )ountering terrorism
b3 Doiling future accounting scandals
c3 %roviding assurance services
d3 %erforming monetary e!changes
<.. Suspicious activity reporting:
a3 *nly applies to ban(ing transactions
b3 Is mandated by state but not federal regulations
c3 Is mostly concerned with embezzlement issues
d3 Is a re-uirement under the Sarbanes-*!ley 5aw of 0''0
e3 none of these
<&. 9hich of these would be considered suspicious activities under current SA$ rules;
a3 8oney laundering
b3 +ribing officials
c3 Transferring money to suspected terrorists
d3 all of these
</. 9hich of these businesses is not re-uired to report suspicious activities under current
federal laws;
a3 +an(s
b3 8oney service organizations
c3 )ommodity Traders
d3 8utual fund dealers
e3 $ace trac(s
<<. 9hich of these statements best describes the relationship between AISs and
countering terrorism;
a3 These are completely independent itemsE there is no relationship
b3 AISs can help counter terrorism using data warehouses
c3 AISs can help by denying financial aid to terrorist groups
d3 AISs can help by identifying international embezzlers
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<=. +ernard 8adoff is most closely associated with which of the following terms;
a3 The father of activity-based costing systems
b3 SA$
c3 %onzi scheme
d3 Sarbanes-*!ley Act of 0''0
e3 Fey sponsor of the %atriot Act
<?. 8any accountants feel that the most important part of the Sarbanes-*!ley Act is:
a3 Its anti-terrorist provisions
b3 Its provisions re-uiring the reporting of suspicious activities
c3 Section &'& on internal controls
d3 Section /'/ on money laundering
<A. The G.S. %atriot act:
a3 $e-uires ban(s to monitor their accounts in foreign institutions for fraud
b3 %rohibits companies from lending money to corporate e!ecutives
c3 *nly applies to publicly-traded companies
d3 all of these are correct
='. A good performance measurement system should evaluate:
a3 %rofitability only
b3 )ustomer satisfaction only
c3 Those aspects of a unit6s performance that are sub1ect to its control
d3 Those aspects of a unit6s performance whether controllable or not
=,. The managerial accounting component of the accounting subsystem contains all ut
which one of the following functions:
a3 )ost accounting
b3 Dinancial accounting
c3 +udgeting
d3 Systems study
=0. 8anagerial accounting principally provides information to:
a3 Stoc(holders
b3 @overnment regulators 2e.g. S#) Dederal ban( e!aminers3
c3 Internal company management
d3 %otential creditors
=.. The process by which a financial transaction is recorded so that its flow through the
system can be followed is called:
a3 Dinancial shadowing
b3 8anagerial trace techni-ue
c3 )oncatenation
d3 An audit trail
=&. 9hich of the following accounting functions has been automated by most companies"
information processing subsystems;
a3 %osting to ledgers
b3 $ecording 1ournal entries
c3 %reparing trial balances
d3 all of the above
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=/. The accounting subsystem must continually interact with the:
a3 %ersonnel subsystem
b3 Information processing subsystem
c3 %roduction subsystem
d3 b and c only
e3 a b and c
=<. 9hat has been the effect on accountants in those organizations which have
computerized their data processing functions;
a3 The need for accountants has disappeared
b3 The accountants have become HpureH boo((eepers
c3 The accountants have become involved in more decision-ma(ing activities
d3 The accountants" decision-ma(ing activities have drastically declined
==. 9hat is the first step to be performed by most organizations in their accounting cycles;
a3 $ecording business transactions in a 1ournal
b3 %reparing a trial balance
c3 $ecording closing entries in a 1ournal
d3 %reparing transaction source documents
e3 none of the above
=?. 9hich of these is a business reporting language often used in recording
or transmitting accounting data;
a3 4+$5
b3 4Dile
c3 A+)
d3 Accounting 5ive
=A. 9hich of the following is not true regarding professional service firms;
a3 The S#) is in favor of professional service firms e!panding their businesses to
include consulting services
b3 As a result of the corporate ban(ruptcies and accounting scandals in 0''0
professional service firms no longer perform any consulting services
c3 %rofessional service firms generally offer a variety of assurance services
including providing assurance over AISs
d3 In the early 0'''"s many large professional service firms sold off the ma1ority of
their consulting practices
?' The principal cause for more timely performance reports in the typical modern
organization is due to:
a3 +etter educated management
b3 Adoption of progressive management philosophies which stress participative
management 2e.g. 8+*3
c3 Information processing systems
d3 Ieed for less information
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?,. The % in the acronym F%I stands for:
a3 %rocessing
b3 %erformance
c3 %lanning
d3 %ersonnel
e3 none of these
?0. Dor performance reports to achieve their control ob1ectives they must:
a3 Include relevant information so that necessary action may be ta(en to
accomplish organizational goals
b3 +e timely so that minimal time elapses between an activity"s occurrence and the
feedbac( reflecting the activity"s efficient or inefficient performance
c3 %rovide subsystem managers with suggestions as to how they can operate their
subsystems more efficiently
d3 all of the above
e3 a and b only
?.. 9hich of the following is intended to solve the problem that financial data
used in one application is not easily transferable to other applications;
a3 48%
b3 #$%
c3 4+$5
d3 485%
?&. H#!cessive data reportingH can result in:
a3 8assive -uantities of data printed out by a company"s computer
b3 The generation of unnecessary reports
c3 Subsystem managers" belief that it is a status symbol to receive
large numbers of internally generated reports
d3 Inefficient decision ma(ing by subsystem managers due to a lac(
of relevant information
e3 all of the above
?/. An e!ample of an assurance service for a company engaged in electronic commerce is:
a3 4+$5
b3 Trust GS
c3 )IT%
d3 )%A Trust Services
?<. 9hich of the following is not a component of the balanced scorecard;
a3 )ustomer (nowledge
b3 Internal business processes
c3 Transaction processing
d3 Dinancial performance
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?=. 9hich of the following e!t describes assurance services;
a3 Auditors are desperate to offer assurance services so that they will still
have business in the future
b3 Assurance and auditing are closely related
c3 Assurance is a guarantee that there is no fraud in a company
d3 Assurance services usually re-uire e!pertise in information technology
??. Information systems auditors are:
a3 Auditors who are concerned with analyzing ris(s associated with computerized
information systems
b3 Individuals who often wor( closely with financial auditors
c3 Auditors who have a lot of technical e!pertise related to information technology
d3 all of the above
?A. 9hich of these is a certification that accountants can earn that focuses on proficiency in
information technology;
a3 )%A
b3 )8A
c3 )ISA
d3 )IT%
A'. The designation for a licensed information systems audit professional is:
a3 )%A
b3 )8A
c3 )IA
d3 )ISA
A,. The certified information systems auditor certification is sponsored by:
a3 ISA)A
b3 AI)%A
c3 I8A
d3 none of these
A0. 9hich of the following e!t describes predictive analytics;
a3 It is a method auditors use to predict when managers might have a wea(
internal control system
b3 It is a techni-ue that uses data stored in data warehouses to create systems that
allow managers to use their data to improve performance
c3 It is a method used to prevent managers from overriding internal controls
d3 none of the above
A.. 9hich of the following describes cloud computing;
a3 It is a is a way of using business applications over the Internet
b3 It is an internal business process over the organizations intranet
c3 It is an internal business process over the organizations e!tranet
d3 none of these
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A&. An advantage of cloud computing is that:
a3 Io one understands it including hac(ers and would-be fraudsters
b3 All data inputs processing and outputs are hidden
c3 Gsers pay only for the services they re-uire
d3 Smaller businesses or government agencies cannot use it
A/. 9hich of these is lea!t li(ely to be an e!ample of a cloud computing service;
a3 The development of a web site for a retail store
b3 The remote processing of payroll records for a manufacturer
c3 The use of computer time on a remote supercomputer by a research firm
d3 Interviewing candidates for an e!ecutive accountant
e3 all of these are reasonable e!amples of cloud computing services
A<. 9hich of these is a drawbac( of cloud computing;
a3 Inability to handle periods of pea( processing loads
b3 Gsers must still invest heavily in computer resources of their own
c3 $e-uires users to pay for services whether they use them or not
d3 8ay re-uires users to trust service provider with sensitive data
e3 none of these are drawbac(s of cloud computing
A=. 9hich of these terms is most closely associated with cloud computing;
a3 Cata processing
b3 *utsourcing
c3 Cata communications
d3 Source programming language
e3 )ompiling
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Matching Questions
Dor the following terms find the correct definition below and place the letter of that response in
the blan( space provided before the term. #ach definition is used only once J there are two
terms that are not used.
A?. KKKKKKK *S)
AA. KKKKKKK SA$
,''. KKKKKKK )ISA
,',. KKKKKKK #$%
,'0. KKKKKKK 4+$5
,'.. KKKKKKK ISA)A
,'&. KKKKKKK IT
,'/. KKKKKKK $#A
,'<. KKKKKKK F%I
,'=. KKKKKKK S*4
Definitions:
A. An international professional association that deals with IT @overnance
+. Dederal legislation passed in response to recent accounting scandals
). An enterprise-wide information system
C. Dederally-mandated reporting of suspicious accounting activities
#. An important database design approach
D. Fey productivity indicator
@. A standardized business reporting language similar to >T85
>. An auditing certification
I. An acronym often used to describe the computer department of an organization
L. A type of (nowledge wor(er
F. A federal initiative to thwart terrorists intent on harming cargo transport
5. An important performance indicator
Short Answer Questions
,'?. Iame some business activities that do not re-uire traditional 1ournal entries.
,'A. @ive three reasons why 4+$5 formatted documents are useful.
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