Bumble Beasley said: “The acquisition/payment process, which often deals with the
asset inventory, creates the greatest value of all business processes.” Which of the
following terms, if eliminated from Bumble’s statement, would make it stronger?
A. Asset
B. Inventory
C. Greatest
D. None of these; Bumble’s statement is fine the way it is.
Benefits of XBRL include:
A. Achieving quicker and more efficient decisions.
B. Improving investor relations through provision of more transparent and user-friendly
information.
C. Both achieving quicker and more efficient decisions and improving investor relations
through provision of more transparent and user-friendly information.
D. Neither achieving quicker and more efficient decisions nor improving investor
relations through provision of more transparent and user-friendly information.
Within the context of the financing process, separation of duties means:
A. The accounting department cannot issue dividend checks without the approval of the
board of directors.
B. An accountant who prepares dividend checks cannot also prepare checks for
repayment of long-term debt.
C. Both the accounting department cannot issue dividend checks without the approval
of the board of directors and an accountant who prepares dividend checks cannot also
prepare checks for repayment of long-term debt are true.
D. Neither the accounting department cannot issue dividend checks without the
approval of the board of directors nor an accountant who prepares dividend checks
cannot also prepare checks for repayment of long-term debt is true.
Accounting information systems have five generic elements. Which of the following
would most appropriately be labeled ‘storage” within the context of the sales/collection
process?
A. A paper file of outstanding customer invoices
B. An electronic database of sales transactions
C. Both a paper file of outstanding customer invoices and an electronic database of
sales transactions
D. Neither a paper file of outstanding customer invoices nor an electronic database of
sales transactions
Consider the following flowchart symbols as you respond to the question:
BLG Corporation uses systems flowcharts to teach its new employees about company
procedures. If BLG adopts XBRL, those system flowcharts will likely incorporate
fewer of ___ and more of ___.
A. Symbol A; Symbol C
B. Symbol B; Symbol A
C. Symbol C; Symbol A
D. None of these; the use of XBRL will not affect symbols used in systems flowcharts.
Liam has developed a good process for safeguarding his company’s information
technology assets. He has completed the following actions with respect to the process:
(i) talked about his methodology with some of his co-workers, (ii) created a schedule
for applying his process to various kinds of information technology assets, (iii)
explained how his process relates to similar processes in his company. To move the
process up one level in the capability maturity model, Liam should:
A. Publish the details of his process in the company newsletter.
B. Publish the details of his process in a practitioner journal article.
C. Establish a budget for the process.
D. Relate it to the four purposes of internal control.
Jon is a new employee at ADX Corporation. He was working late one night when he
saw Beatrice, a long-time ADX employee, leaving the building with a company
computer. Based on the Langenderfer and Rockness model, what should Jon do?
A. Inform Beatrice’s supervisor.
B. Ask Beatrice why she was leaving the building with a company computer.
C. Consult ADX’s code of ethics.
D. Take a photo of Beatrice leaving the building with the company computer.
Sally, a sales representative for WER Corporation, ensures that she does a thorough
credit check for customers who want to purchase goods on account. The most important
internal control WER should implement is:
A. Separation of duties.
B. Adequate documentation.
C. A risk management plan.
D. Employee training.
Consider the following short case as you respond to the question:
Amanda is a partner in a CPA firm; she supervises a staff of ten professionals, some of
whom are already licensed CPAs and some of whom are still working toward licensure.
She is responsible for audits of independent bookstores in California, Nevada and
Arizona. Amanda is concerned that the less experienced professionals she supervises
are repeating the mistakes she and the more experienced professionals on her team
made when they began auditing. She therefore wants to create a knowledge
management system.
Consider the following comments Amanda could make after purchasing or building
appropriate tools for knowledge management. Which of them best demonstrates that
she understands the seven steps in creating a knowledge management system?
A. I’m glad that’s over. Now that the system is designed, we don’t have to think about it
again.
B. We can monitor the system in the same ways we monitor our internal control plan.
C. Now that the system is created, we need to determine its value for balance sheet
purposes.
D. I can be assured now that relapse errors are a thing of the past.
Steps for Better Thinking involves all of the following stages except:
A. Identifying.
B. Exploring.
C. Prioritizing.
D. Thinking.
Consider the following examples of computer crime as you answer the question:
i. Social Security numbers are stolen from a company’s database.
ii. A fraudster uses a computer to identify people over the age of 80 with annual
incomes of $250,000 or more.
iii. A supervisor receives threats from a worker via e-mail; the worker demands
promotion as a condition of not exposing the supervisor’s illegal acts.
iv. An unhappy customer launches a denial-of-service attack.
Which of the following pairs an item from the list with an appropriate description of a
business risk?
A. Extortion, i
B. Service interruption, ii
C. Extortion, iii
D. None of these
The conversion process involves three common resources: material, direct labor and
overhead. Which of the following is an example of material in that context?
A. Paper used to create a textbook.
B. Tires used to manufacture a truck.
C. Both paper used to create a textbook and tires used to manufacture a truck.
D. Neither paper used to create a textbook nor tires used to manufacture a truck.
List, in order, the steps in the sales/collection process discussed in the text.
Homemade Crafts Company (HCC) sells collectible items such as dolls, jewelry, drink
coasters and table linens. The company, which has five full-time employees, obtains its
merchandise from independent contractors throughout the United States; they then
mark up the products and sell them at craft stores and other outlets. Two of the five
employees interact with the independent contractors, arranging inventory purchases
based on demand for HCC’s products and their own personal preferences. Those same
employees use their personal vehicles to transport the inventory from HCC’s main
office to the retail locations where they will be sold. A third employee serves as the
company’s receptionist, while the fourth manages all aspects of the accounting
information system. The company president is the fifth employee, and is in charge of
administrative affairs such as hiring, performance evaluation and publicity. HCC
purchases its entire inventory on account from the independent contractors, some of
whom offer cash discount terms for early payment. All HCC’s sales are for cash; each
inventory item is marked up 25% on its cost to determine the selling price. For
example, if a product costs $100 to buy, HCC sells it for $125. The two sales employees
bring all cash receipts back to HCC’s main office; the receptionist deposits the cash in
the bank at least once a week. Identify three risk exposures in HCC’s sales/collection
process. For each risk exposure, suggest two internal controls that will address it. Also
identify two risk exposures for the independent contractors’ sales/collection process; for
each risk, suggest two internal controls that will address it.
Several symbols that might be used in a systems flowchart of the acquisition/payment
process are listed below.
Indicate which symbol should be used to depict each of the following. Some symbols
may be used more than once; others may not be used at all. 1> Bill of lading 2>
Electronic vendor file 3> End 4> File manually by due date 5> Manually count
inventory 6> Move to next page 7> Prepare check 8> Purchase requisition 9> Sufficient
inventory on hand? 10> To vendor
The text discussed five business processes: sales/collection, acquisition/payment,
conversion, financing and human resources. List and discuss two ways the processes
are similar; list and discuss two ways they are different from one another.
Create a narrative description of the REA model shown below.
In your own words, explain the purpose of the capability maturity model. List the levels
of the model, and explain each one in your own words.