The acquisition/payment process helps an organization create value for its stakeholders,
which can include:
A. Vendors.
B. Stockholders.
C. Employees.
D. All of these.
Gelton was leading a team of three co-workers focused on improving their company’s
process for hiring new employees. They had read the company procedures manual
describing the current process, then interviewed newly-hired workers about their
experiences. They used the principles of activity-based costing to determine the average
cost of hiring a new employee, then created a line graph tracing the average cost over
the last twelve months. Using the generalized model of BPM discussed in the text,
Gelton and his team still need to complete steps:
A. Five through seven.
B. Four through seven.
C. Three through five.
D. Two through four.
A systems flowchart could be helpful in fulfilling which generally accepted auditing
standards?
A. Internal control
B. Evidence
C. Both internal control and evidence
D. Neither internal control nor evidence
Consider the following short case as you respond to the question:
Melissa is an internal auditor for the County of Bufflufia. Her job responsibilities
include providing training on information systems security and checking the work of
data entry clerks. Melissa is also part of a team that responds to denial-of-service
attacks on the county’s information system. Her co-worker, Eugene, ensures that all the
county’s computers have the most up-to-date antivirus software; he also enforces the
county’s policy of backing up sensitive data, such as employee social security numbers
and other payroll information, at least once a day. The back-ups are dated and stored in
a locked filing cabinet.
Melissa’s responsibilities relate to which elements of the CIA triad?
A. Confidentiality and availability
B. Confidentiality and data integrity
C. Availability and data integrity
D. None of these
OTA Corporation completed the following transactions as part of its sales/collection
process. For each transaction, indicate the document(s) OTA would use. (Some
transactions may require more than one document; other transactions may require no
documents.) a. Sold consulting services for cash, $500. b. Sold merchandise with a cost
of $100 on account for $300. c. Paid a common carrier $50 to ship the merchandise. d.
Collected cash for sale on account, $200. e. Estimated bad debts for the year, $80.
The systems development life cycle has often been criticized because:
A. It became obsolete when COSO published its internal control framework.
B. Its risks cannot be managed with the COSO framework.
C. Both it became obsolete when COSO published its internal control framework and
its risks cannot be managed with the COSO framework.
D. Neither it became obsolete when COSO published its internal control framework nor
its risks cannot be managed with the COSO framework.
As a processing tool in an accounting information system, ERP software is capable of
generating outputs in the form of general-purpose financial statements. Which of the
following statements is most true?
A. The financial management module alone contains all the information a company
needs to produce its financial statements.
B. All four common ERP system modules provide information to the general purpose
financial statements.
C. A company needs to create a fifth module called “financial statement creation” if it
wants to use an ERP system to create its financial statements.
D. None of these statements is true.
Consider the following short case as you respond to the question:
SPC Corporation sells computer security software. They maintain their AIS using
general ledger software; data files are backed up twice a day. Sales staff can access the
customer database, inventory files and general ledger, as well as sales-related
documents such as invoices and sales orders. Newly hired sales staff members at SPC
receive the company procedures manual which explains the process used to complete
the steps in the sales/collection process. To minimize costs, SPC designates up to five
sales staff members each month who can do credit checks for all new customers in
addition to processing sales. SPC bills its clients monthly and uses the balance forward
method of accounting for receivables; all cash receipts from clients are processed using
a lockbox procedure. The lockbox firm’s fee is 3% of all collections. SPC’s accounting
department estimates bad debts at the end of each fiscal year; they are normally about
1% of total sales.
Internal control weaknesses for SPC are indicated by which of the following?
A. Sales staff access to the AIS
B. Paying a fee to a lockbox firm
C. Estimating bad debts using total sales
D. All of these
Consider the following short case as you respond to the question:
SPC Corporation sells computer security software. They maintain their AIS using
general ledger software; data files are backed up twice a day. Sales staff can access the
customer database, inventory files and general ledger, as well as sales-related
documents such as invoices and sales orders. Newly hired sales staff members at SPC
receive the company procedures manual which explains the process used to complete
the steps in the sales/collection process. To minimize costs, SPC designates up to five
sales staff members each month who can do credit checks for all new customers in
addition to processing sales. SPC bills its clients monthly and uses the balance forward
method of accounting for receivables; all cash receipts from clients are processed using
a lockbox procedure. The lockbox firm’s fee is 3% of all collections. SPC’s accounting
department estimates bad debts at the end of each fiscal year; they are normally about
1% of total sales.
Based on its risk exposures, SPC would benefit most from implementing which of the
following internal controls?
A. Cross-training employees
B. Separation of duties
C. Normalized database files
D. Use of the COSO internal control framework
COBIT’s enablers include principles, policies and frameworks. Which of the following
provides the best example of that enabler based on ISACA’s explanation?
A. a risk/control matrix
B. a comprehensive set of financial statements
C. a corporate tax return
D. all of these
All of the following are levels of the capability maturity model except:
A. Analytical
B. Repeatable
C. Defined
D. Managed
A well-designed AIS can respond to many parts of the FASB Conceptual Framework.
Descriptions of the assumptions, principles and constraints of the framework are listed
below in alphabetic order. Group them as they are found in the conceptual framework.
a. A company will continue in business long enough to satisfy its current obligations.
b. A company’s accounting records should be kept separate from those of its owner.
c. Absent other information, assets are recorded and reported at their purchase price.
d. Financial statements should include complete information for making decisions.
e. For financial reporting purposes, we divide the life of a business into quarters, years
or some other measurement of time.
f. Revenue should be recorded in the AIS when goods and services are exchanged.
g. The benefits of obtaining information should outweigh the cost of obtaining it.
h. The costs of earning revenue should be put on the same income statement with the
revenue they generate.
i. The value of a dollar is constant over time.
j. When a dollar amount is too small to make a significant difference in decision
making, other accounting rules may be ignored.
k. When faced with a choice of methods, make the choice that puts the business in the
worst possible financial light.
Company A sells goods to its customers on credit; Company B sells services to its
customers for cash. Which of the following statements is most true?
A. The fundamental role and purpose of the sales/collection process will be the same
for both companies.
B. Only Company B has a true sales/collection process because it sells services rather
than goods.
C. Only Company A has a true sales/collection process because it sells on credit rather
than for cash.
D. None of these statements is true.
An inexperienced auditor verified the computation of depreciation on a machine, but
did not actually see the machine. The auditor’s actions led to a weakness in the ___
generic step of a financial statement audit.
A. Second
B. Third
C. Fourth
D. Fifth
Expectancy theory suggests that three variables contribute to motivation. Consider the
questions listed below. For each one, identify the variable that most clearly applies.
a. Can I be assured of a pay raise once I pass the CPA exam?
b. Do I really want this promotion?
c. How badly do I want the approval of my peers and supervisor?
d. How good will I feel if I achieve this goal?
e. If I attend a one-week seminar on fraud examination, will I be able to pass the
certification exam?
f. If I get promoted to accounting manager, will I have more flexibility with my
working hours?
g. If I read enough books, will I be able to make our inventory purchasing process more
efficient?
h. If I study at least three hours per night, will I be able to learn this new accounting
software?
i. What is my motivation for learning this new accounting software?
j. Will my chances of getting a better job increase if I get another college degree?
Consider the following table as you respond to the questions:
Which of the following is the best choice for Item D in the table?
A. Risk response
B. Internal environment
C. Information and communication
D. Monitoring
Which of the following transactions would be appropriately processed in the
sales/collection process?
A. THT Corporation purchased merchandise on account from HRS Corporation.
B. HRS Corporation received cash from THT Corporation for a previous sale on
account.
C. Both THT Corporation purchased merchandise on account from HRS Corporation
and HRS Corporation received cash from THT Corporation for a previous sale on
account.
D. Neither THT Corporation purchased merchandise on account from HRS Corporation
nor HRS Corporation received cash from THT Corporation for a previous sale on
account.
The purpose of the conversion process is to transform material, labor and overhead into
a finished product. To accomplish that purpose, organizations can use one of three
systems. Which of the following best pairs a system with products that would be
appropriately manufactured using it?
A. Process: decks of playing cards, compact discs
B. Job: plastic bottles, aluminum cans
C. Process: custom-built homes, original works of art
D. Hybrid: decks of playing cards, made-to-order smoothies