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Consider the following short case as you respond to the question:
ELM Corporation sells durable medical equipment, such as wheelchairs and hospital
beds; each salesperson at ELM specializes in a specific type of medical equipment.
When a prospective client comes into their store, a greeter does a preliminary needs
assessment to determine what type(s) of equipment the client requires. Based on that
preliminary assessment, the greeter will match the client with a member of the sales
staff. The staff specialist does a more detailed needs assessment, the results of which go
into a computerized database along with the client's name, address, phone number and
other related information. After the needs assessment, the staff specialist determines the
client's budget, as well as whether the client has insurance coverage for the desired
equipment; clients without insurance coverage receive a 10% discount on all equipment
purchased up to $1,000, and a 20% discount for any sales over $1,000. The staff
specialist makes recommendations based on the client's needs and budget. If the client
chooses to purchase from ELM, the store fills out any necessary insurance paperwork
and collects the client's portion of the bill. For example, if an insured client purchases a
wheelchair with a price of $2,000 and the insurance covers 80%, ELM collects $400
from the client at the time of the sale. ELM accepts cash, checks and major credit cards
from clients. Insurance payments go directly to ELM's bank account and normally
arrive within 60 days of the sale. If the client needs more than one type of durable
medical equipment, the first staff specialist introduces the client to a subsequent staff
specialist, who repeats the process until all the client's equipment needs are met.
A systems flowchart of ELM's sales/collection process would include all of the
following column headings except:
A. Client
B. Staff specialist
C. Equipment type
D. Greeter
In the COSO enterprise risk management framework, an organization's overall tone
relates most closely to:
A. Internal environment
B. Objective setting
C. Event identification
D. Monitoring
CGI Corporation was preparing to issue long-term debt securities. They planned to pay
10% interest semi-annually, although investments of similar risk were paying 12% at
the time. Which of the following terms best describes the 12% interest rate?
A. Coupon
B. Market
C. Relevant
D. Current
Sienna used a stack of sales invoices to record journal entries in the AIS. She used those
entries and others to prepare an income statement that was later reviewed by her
supervisor. The supervisor's review could best be described as which generic element of
the AIS?
A. Input
B. Output
C. Process
D. Internal control
As a form of internal control for XBRL, periodic user training best addresses the risk
of:
A. Tagging errors.
B. Data lost in transmission.
C. Both tagging errors and data lost in transmission.
D. Neither tagging errors nor data lost in transmission.
After being laid off from his job, Dale applied for unemployment benefits. During his
initial interview to establish eligibility, the interviewer explained his benefits would last
no more than ten weeks; Dale later consulted the official web site and learned that,
under the right circumstances, his unemployment benefits could last up to six months.
Which of the following internal controls is least likely to address this situation?
A. Adequate supervision
B. Adequate documentation
C. Employee bonding
D. Preformatted data entry screen
An organization that provides a contractual service to deploy, host and manage
applications for customers remotely from a centralized location is called an:
A. Enterprise resource planning consultant
B. Application service provider
C. Enterprise service provider
D. Application service planning consultant
The process of identifying, measuring and communicating economic information to
permit informed judgments and decisions by users of the information is called:
A. Accounting
B. Bookkeeping
C. Making journal entries
D. Preparing financial statements
Consider the following statements as you respond to the question:
i. Ask managers to think of one hundred uses for a brick, other than for building things.
ii. Assess the educational background and organizational experience of employees.
iii. Conduct a one-day seminar on how business processes can create value in the
marketplace.
iv. Encourage managers to suggest ideas, even if they are impractical.
v. Hold weekly meetings to update interested parties on the BPM project; ensure at least
one member of top management attends each meeting.
vi. Ignore opinions and insights from people not directly involved with a business
process.
The text discussed seven basic principles of business process management. Which
statement both illustrates one of the principles and relates to the internal environment
component of the COSO enterprise risk management framework?
A. I
B. III
C. V
D. VI
Most AIS designers and auditors find it best to start a REA model by identifying events,
which come in three broad categories: operating, information and
decision/management. Which category best describes each item below?
a. Buying supplies
b. Deciding how to document an AIS
c. Designing internal controls
d. Developing a risk management plan
e. Issuing capital stock
f. Motivating employees
g. Posting transactions to the ledger
h. Purchasing advertising
i. Recording transactions in a journal
j. Selling equipment
Please refer to the following case as you answer the question:
Comprehensive Waste Management (CWM) provides trash hauling services for several
communities in southern California. When a new client wants to establish service, the
client calls the company's main office on the phone. A CWM employee collects the
following information from the client: name, street address, city, state, ZIP code, area
code, telephone number, e-mail address. The employee gives the new client information
regarding regular weekly service dates, special services provided by the company, fees
and billing procedures. CWM bills its clients every two months in advance of the
service; for example, bills are sent to clients at the beginning of January for the months
of January and February. Initially, CWM does all its billing manually; they send out
paper bills and collect payment from clients via check. Once service is established, a
client can create an online account; the online account provides an option for paperless
billing and a separate option for charging a credit card rather than paying with a mailed
check. To create an online account, the client creates login credentials (user name and
password); they provide their CWM account number (provided on the invoice) and
relevant credit card data (type of card, name, billing address, and security code).
CWM's database uses the account number to look up the client's original information,
then merges the new information with it.
Which of the following data flow diagram levels provides the highest level view of the
CWM information system?
A. Context
B. Level Zero
C. Level One
D. Some other level
Consider the list of risks and internal controls in the table below. For each row, indicate
whether the internal control addresses the risk. If it does, indicate whether it is primarily
preventive, detective or corrective in nature.
Carlos is the vice president of finance at PLP Corporation. When he joined the company
five years ago, the finance division was organized in two departments: operating
transactions and non-operating transactions. Each department had two employees and a
manager. The operating transactions department handled all aspects of transactions
dealing with inventory, supplies, payroll and other operating expenses; the
non-operating transactions department handled all aspects of transactions dealing with
short-term investments, long-term debt and shareholders. Any transactions that did not
fit one of the two groups were handled by the vice president of finance. The finance
division had its own procedures manual, organized into three chapters: operating
transactions, non-operating transactions, other transactions. Within the operating
transactions department, one employee handled payroll only, while the other employee
handled all aspects of non-payroll transactions. Within the non-operating transactions
department, one employee handled transactions related to short-term investments. The
other employee handled long-term debt transactions, while the department manager
handled all aspects of transactions dealing with shareholders.
Risk exposures for the finance division at PLP include:
-Cash dividends being sent to the wrong shareholders
-Embezzlement of cash
-Missed payments on long-term debt
-Payroll checks issued to employees no longer working for PLP
-Payroll miscalculations
Using the format illustrated in the text, design a risk/control matrix for the risk
exposures listed above.
The chapter suggested a seven-step process for creating a systems flowchart. Consider
how you register for courses and pay your fees each term; complete the first four steps
(and only the first four steps) of the seven-step process within that context.
Consider the audit descriptions and types paired below. Indicate with an X in the
appropriate column whether the audit described is paired with the appropriate type.
You have been hired as a consultant to design and implement a new accounting
information system for PRI Corporation. Explain how you would structure the AIS.
Give two examples of each structural element; also indicate one question you would ask
PRI's management to assist in your work. (Do not use examples and questions listed in
the text.)
