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Consider the following partially completed risk/control matrix as you answer the
questions:
Assume the risk/control matrix is organized like the one presented in the chapter. The
best entry for Item D is:
A. Human error risk
B. Liquidity risk
C. Systems risk
D. Business strategy risk
Please consider these independent cases as you respond to the question:
-Austin is the managing partner of a small CPA firm. In an effort to standardize certain
internal business processes, Austin formed a team that developed a set of guidelines for
tasks such as expense reimbursements and information technology purchases. After
developing the guidelines, the team devised ways to determine if the processes are
performing as expected.
-Julie is the chief financial officer of PSC Corporation. She recently worked with a
team to develop a broad set of principles that should characterize PSC's business
processes. The team has applied those principles to some tasks in the accounting
department; their next task is to teach other PSC employees about the principles.
-Rob is an accountant at CTR Company. The owners of CTR, Lynn and Mark, don't
know much about accounting, so Rob completes accounting tasks in whatever way
seems best to him.
Which level of the capability maturity model best describes Austin's company?
A. Chaotic
B. Defined
C. Managed
D. Optimized
Consider the following short case as you respond to the question:
Abruzzi's Italian Kitchen is a small family restaurant with an administrative staff of four
people. Giuseppi Abruzzi is the chief executive officer; his wife Maria is the chief
financial officer. Their son Antonio is responsible for all transactions dealing with
kitchen supplies, including the raw materials for menu items; their son Carlo is
responsible for all transactions dealing with dining room supplies, such as eating
utensils. The restaurant's administrative practices have developed over the ten years of
its existence with minimal reliance on information technology and formal procedures
and a stronger emphasis on interpersonal relationships with a few reliable vendors.
Once a month, Antonio places orders for kitchen supplies with one of four vendors
based on price; the supplies are usually received within ten calendar days. On receipt of
the supplies, Antonio pays the vendor with a company check. Carlo follows a similar
process for dining room supplies, but works with a set of three vendors, none of which
sell kitchen supplies.
Which of the following statements about internal control at Abruzzi's Italian Kitchen is
most true?
A. It has adequate separation of duties because Giuseppi is CEO and Maria is CFO.
B. It has adequate separation of duties because Antonio orders kitchen supplies and
Carlo orders dining room supplies.
C. It does not need to separate duties because it is a family-owned business.
D. None of these statements is true.
Internal control has four major purposes in organizations. Ways to achieve at least one
of the four include: (i) requiring supervisory review of how complex transactions are
recorded in the journal, (ii) using general ledger software such as Peachtree.
A. I only.
B. II only.
C. Both I and II.
D. Neither I nor II.
According to COBIT 5, an organization's information technology governance and
management should cover the enterprise end-to-end. Which of the following parts of an
organization would likely need information on inventory levels?
A. production and operations
B. marketing
C. accounting
D. all of these
Which of the following business processes is most closely associated with each of the
items below: (a) conversion process, (b) financing process, (c) human resource process?
1> Americans with Disabilities Act
2> Capital stock
3> Direct material
4> Dividends
5> Form W-2
6> Hiring employees
7> Initial public offering
8> Optimal capital structure
9> Process costing
10> Thorough background checks
Consider the following REA diagram as you respond to the question:
The box in the first column represents a(n):
A. Resource
B. Event
C. Internal agent
D. External agent
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. The process of selling tickets at the box office could be represented
with any of the following symbols except:
A. Symbol F
B. Symbol G
C. Symbol I
D. Symbol J
George received an e-mail that threatened to release his personal financial data unless
he paid a fee. That situation is an example of:
A. Extortion
B. Intrusion
C. Information manipulation
D. Error
Time-series forecasting is an example of ___ analytics.
A. predictive
B. prescriptive
C. descriptive
D. evaluative
The generalized model of business process management discussed in the text comprises
seven steps. Data flow diagrams could be used in a BPM project to: (i) select the
process and define its boundaries, (ii) observe, document and map the process steps and
flow, (iii) optimize the process.
A. I and II only
B. I and III only
C. II and III only
D. I, II and III
A systems flowchart of the financing process is likely to include which of the following
column headings?
A. Debt and equity
B. Cash dividends and stock dividends
C. Both debt and equity and cash dividends and stock dividends
D. Neither debt and equity nor cash dividends and stock dividends
XBRL provides ___ for a company's financial information.
A. Context
B. GAAP
C. Both context and GAAP
D. Neither context nor GAAP
Internal controls have four fundamental purposes. Which of the following pairs an
internal control for XBRL with an appropriate purpose of internal control?
A. Electronic tagging, promoting operating efficiency
B. Centralized approval process for taxonomy additions, safeguarding assets
C. Both electronic tagging, promoting operating efficiency and centralized approval
process for taxonomy additions, safeguarding assets
D. Neither electronic tagging, promoting operating efficiency nor centralized approval
process for taxonomy additions, safeguarding assets
Data flow diagrams incorporate four symbols. List the symbols; for each one, give two
examples of how it might be used in a DF
D.
List the four characteristics suggested by McDonald to be considered a professional.
WDN Corporation recently purchased JZN Corporation; the two companies are now
trying to merge their separate charts of accounts into a single chart of accounts.
Selected block-coded accounts from the two separate accounting information systems
appear below:
Management wants to retain the ability to produce separate financial statements for
each company, as well as a combined set of financial statements for the two companies
together. Use the principles of hierarchical coding to assign new account numbers to the
ten accounts listed above in a way that will achieve management's objectives. Explain
how the account numbers illustrate the principles of hierarchical coding and how they
help achieve management's objectives.
The capability maturity model has five levels: chaotic, repeatable, defined, managed,
and optimized. Could an organization benefit from using XBRL at each of the five
levels? If so, how? If not, why not? Ensure that your response addresses each level
individually.
Create all necessary database specifications (table names and field names) for ELM
Corporation's sales/collection process based on the following narrative. Indicate
primary keys by underlining and foreign keys with brackets.
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 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.
Analyze the following narrative. Identify five risk exposures ELM faces; for each
exposure, recommend two internal controls. 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 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.
