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Samantha and Josephine were preparing to start their own clothing business; they
contacted their friend David, a recent graduate from Big State University's accounting
program, to learn about setting up their accounting information system. If David uses
Steps for Better Thinking to help them set up the system, we can infer that their
accounting processes are at the ___ level of the capability maturity model.
A. Chaotic
B. Repeatable
C. Managed
D. None of these
___ comprises seven interrelated elements.
A. The COSO enterprise risk management framework
B. The generalized model of business process management
C. Expectancy theory
D. All of these
Sylla and Wen suggested a three-stage process for evaluating information technology
investments. At which stage of the process would someone be most likely to use the
weighted-rating technique discussed in the chapter?
A. Step 1
B. Step 2
C. Step 3
D. None of these. The weighted-rating technique is unrelated to the Sylla and Wen
framework.
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.
Which of the following statements about documentation for ELM's sales/collection
process is most true?
A. Agents in a REA model are likely to be column headings in a systems flowchart.
B. A leveled set of data flow diagrams will likely include one level for each agent in a
REA model.
C. Both agents in a REA model are likely to be column headings in a systems flowchart
and a leveled set of data flow diagrams will likely include one level for each agent in a
REA model
D. Neither agents in a REA model are likely to be column headings in a systems
flowchart nor a leveled set of data flow diagrams will likely include one level for each
agent in a REA model
The procedures manual for THM Corporation included the following statements:
a. Accounting department employees are encouraged to obtain a professional
certification.
b. Adjusting entries involving estimates must have those estimates approved by the
CFO before they are recorded in the AIS.
c. All employees accrue sick time at the rate of one hour per month.
d. All purchase orders must be prepared in triplicate, with the original going to the
vendor, the blue copy staying in purchasing and the yellow copy returning to
department that initiated the purchase request.
e. All transactions must be recorded in the journal, then posted to the ledger.
f. Employees are paid twice a month; journal entries for payroll are recorded two days
prior to each pay date.
g. New account numbers must follow the principles of hierarchical coding; they must
be reviewed and approved before becoming part of the AIS.
h. THM is organized in five major departments: accounting, marketing, human
resources, information systems and operations.
i. THM uses Great Plains Dynamics as its general ledger software. Great Plains will not
allow transactions to be recorded unless the equality of debits and credits is maintained.
j. THM's accounting information system is audited annually by Dewey, Cheatam and
Howe, CPAs.
Which five statements from the procedures manual most directly explain internal
controls related to the accounting cycle?
Consider the following REA model as you answer the question:
The "employee" table is likely to include all of the following fields except:
A. Department
B. Gender
C. Last name
D. Age
Information literacy is the ability to ___ information in all of its various formats.
A. Find and evaluate
B. Use and communicate
C. Find, evaluate, use and communicate
D. Use and evaluate
COBIT's enablers include people, skills and competencies. Personal competencies
needed by accounting professionals include:
A. legal/regulatory perspective
B. measurement
C. professional demeanor
D. all of these
One of the transactions commonly associated with the financing process is the issuance
of long-term debt. Which of the following pieces of information is least likely to be
required to process such a transaction?
A. Coupon interest rate
B. Market interest rate
C. Lender identification data
D. Shareholder approval
Internal controls in the sales/collection process include:
A. Pre-numbered documents.
B. Adequate supervision.
C. Bank reconciliations.
D. All of these.
In response to information overload, decision makers can:
A. Allow more time to complete important tasks.
B. Rely on informal language to describe information.
C. Both allow more time to complete important tasks and rely on informal language to
describe information.
D. Neither allow more time to complete important tasks nor rely on informal language
to describe information.
Annie and Ray were having a conversation about business process management; several
statements from that conversation are listed below:
a. A weekly e-mail to all employees will help everyone stay informed about our
progress.
b. I know a great consultant who can help us out; that way, we won't have to bother
company employees too much.
c. I think we should create a suggestion box where employees can give us their ideas
and express their concerns about the project.
d. I'd suggest putting together a cross-functional team to help with the project, but we
have to make sure we avoid people who will only protect their own department.
e. Let's make some minor modifications to our existing process; that should be enough
to satisfy almost everyone.
f. Our company has always been able to compete based on the quality of our product;
any new process we design should enable us to keep doing that.
g. The very first thing we need to do is get rid of all paper forms; they only create waste
and inefficiency.
h. The vice president of operations gave me a clear description of what the process
should look like, but I'm not sure he understands how things really work around here.
i. We should consider the impact this new process will have throughout the
organization.
j. We should look for a consultant with a lot of experience; the consultant should be able
to provide us with all the detail we need about matters like how long the project will
take and what milestones we should set along the way.
Analyze the statements; indicate which ones support the basic principles of business
process management discussed in the text. For each statement, indicate the relevant
BPM principle (whether supported or not).
A corporation hired an ERP consultant to recommend an ASP for its payroll processing.
In a systems flowchart of the payroll process, which of the following is most likely to
be outside the system boundary?
A. ERP consultant
B. ASP
C. Both ERP consultant and ASP
D. Neither ERP consultant nor ASP
As an internal control, RSR Corporation requires two signatures on all checks over
$500, thus illustrating the importance of:
A. Human judgment.
B. Information technology.
C. Both human judgment and information technology.
D. Neither human judgment nor information technology.
According to COBIT 5, an organization's information technology governance and
management should enable a holistic approach. Which of the following frameworks
provides the most holistic view of an organization?
A. FASB Conceptual Framework
B. AICPA Core Competencies Framework
C. Brown's risk taxonomy
D. Vroom's expectancy theory
Consider the following information items as you respond to the question:
i. Customer master file
ii. Journal entry to record the receipt of cash
iii. Pre-numbered documents
iv. Schedule of accounts receivable
Accounting information systems have five generic elements. Which of the following
statements is most true?
A. "Pre-numbered documents" can be an example of three of the five elements.
B. "Schedule of accounts receivable" can be an example of all five elements.
C. Both "Pre-numbered documents" can be an example of three of the five elements and
"Schedule of accounts receivable" can be an example of all five elements are true.
D. Neither "Pre-numbered documents" can be an example of three of the five elements
nor "Schedule of accounts receivable" can be an example of all five elements is true.
Consider the following short case as you respond to the next nine questions:
ABC Consulting's employees include management, consultants and office staff. The
company accepts engagements related to internal control design and evaluation, as well
as enterprise risk management plans. A customer can purchase the two services
independently of one another. The office staff bills clients on a monthly basis with
terms of 2/10, n/30. All consulting clients must sign a contract, which is also signed by
an ABC manager. One member of ABC's management team assigns at least one
consultant to work with the customer until the engagement is complete. Consultants can
be assigned to multiple engagements simultaneously, but every consultant must always
be working on at least one engagement. Each client may have only one contract with
ABC at a time.
The smallest possible number of internal agents in the third column of a REA model of
the case is:
A. One
B. Two
C. Three
D. None. Internal agents do not appear in the third column of a REA model.
Refer to the following case as you respond to the question:
The Celebration Theatre is a small, independent theatre that puts on 12 plays per year.
30 days before the start of each calendar quarter, Celebration prepares advertising for
the productions in the upcoming quarter. They advertise on their web site, via e-mail to
their season subscribers and via direct mail and brochures to others.
Patrons can buy tickets for a single play; alternatively, they can subscribe to all three
plays each quarter. Quarterly subscriptions offer a 25% discount from the prices of
single tickets. Patrons may purchase tickets over the phone, at the box office or via the
theatre's web site. All tickets are held at the box office where they can be picked up as
early as one week prior to the performance. The theatre has an "open seating" plan, so
patrons do not reserve a specific seat at any performance.
If tickets are purchased in person at the box office, non-subscribers may pay with cash
or a major credit card; subscribers can pay with cash, major credit card or check. All
tickets purchased over the phone or via the web site must be paid for with a major credit
card. Celebration maintains an electronic database to track all ticket sales; paper tickets
are printed at least ten days prior to a performance.
Any paid tickets that are not claimed at least thirty minutes prior to the performance are
sold on a "first-come, first-serve" basis at a 50% discount.
Refer to the previously presented set of flowcharting symbols labeled Symbol A
through Symbol J. Which of the following is most likely to be represented with Symbol
B?
A. A patron's decision to purchase tickets
B. The theatre management's decision about which plays to produce
C. Determining whether a patron is a subscriber
D. All of these
