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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. Based on the narrative,
identify three risk exposures for the finance department at PLP Corporation. For each
risk exposure, suggest two internal controls that would address it. Use the outline below
to record your responses.
1) Risk exposure: _____________________________________________
a. Control: ________________________________________________
b. Control: ________________________________________________
2) Risk exposure: _____________________________________________
a. Control: ________________________________________________
b. Control: ________________________________________________
3) Risk exposure: _____________________________________________
a. Control: ________________________________________________
b. Control: ________________________________________________
A REA model includes 'send order" as an event and "customer" as an agent. Which of
the following is most true?
A. The primary key from the 'send order" table should be included in the "customer"
table.
B. The primary key from the "customer" table should be included in the 'send order"
table.
C. Both the primary key from the 'send order" table should be included in the
"customer" table and the primary key from the "customer" table should be included in
the 'send order" table
D. Neither the primary key from the 'send order" table should be included in the
"customer" table nor the primary key from the "customer" table should be included in
the 'send order" table
Consider the following independent situations as you answer the questions:
a. Irene, a freshman accounting major, thought she would benefit from reading an
intermediate accounting text while taking introductory financial accounting.
b. Bradley developed a plan to study for all four parts of the CPA exam during his last
semester at college, thus making himself ready to take the exam immediately after
graduation.
c. Jorge met weekly with a group of five students, all of whom were preparing their
resume for the very first time.
d. Every time Maria encountered a topic she did not understand in her accounting
information systems course, she did a Google search for it.
Which decision makers are experiencing information overload due to task and process
parameters?A. Bradley onlyB. Jorge onlyC. Both Bradley and JorgeD. Neither Bradley
nor Jorge Irene, information characteristics.
One advantage of the systems development life cycle is its opportunity for user input. It
therefore shares some commonalities with which elements of the COSO enterprise risk
management framework?
A. Internal environment and risk response
B. Event identification and information and communication
C. Event identification and risk response
D. Internal environment and information and communication
Consider the following partially completed flowchart as you respond to the questions:
Consider the symbol labeled "
C." Including the symbols before and after it, which of the following principles is
illustrated?
A. Every document should have a clear point of origin.
B. Every document should have a clear point of termination.
C. Both every document should have a clear point of origin and every document should
have a clear point of termination.
D. Neither every document should have a clear point of origin nor every document
should have a clear point of termination.
The adjective "pre-numbered" is associated with which generic element of an
accounting information system?
A. Input
B. Internal control
C. Both input and internal control
D. Neither input nor internal control
Consider the following case as you respond to the questions:
HSO Corp. designs, manufactures and sells golf carts, scooters and similar vehicles.
When a prospective client contacts one of their seven corporate offices, the office
manager fills out an "intake questionnaire" to determine if HSO can meet the
prospective client's needs. The office manager assembles a team of employees with
expertise in design, production, marketing and accounting; the team reviews the intake
questionnaire and determines if HSO can take on the order. If so, the office manager
prepares a three-page written proposal for the prospective client; the proposal explains
the responsibilities of both HSO and the client, along with a timeline and a budget. The
proposal is forwarded to the prospective client electronically, and the client has ten
calendar days to accept it. If HSO cannot take on the order, the prospective client
receives an automatically generated form letter; if the prospective client does not accept
the proposal within ten calendar days, they receive a different form letter. The new
client remits half of the fee at the time the proposal is accepted, and HSO prepares
weekly progress reports as the project moves forward. The reports are filed in HSO's
database; a hard copy is sent to the client. On a monthly basis, HSO's office manager
prepares a comprehensive status report for all current engagements. One week before
each project is concluded, HSO bills the client for half of the remaining amount due;
after the client has paid all outstanding invoices, HSO completes the work and bills the
client for all remaining amounts. HSO delivers the finished product; the client must pay
the full amount due within 30 days of the final invoice date. If the client pays within 15
days, HSO gives a 3% discount off the amount due.
On April 1 of the current year, EPL Corporation accepted a three-page written proposal
from HSO to design and build 10 customized golf carts for EPL's internal use. The total
price for the order was $3400. In a systems flowchart of EPL's process, ___ is likely to
be outside the system boundary.
A. HSO Corporation
B. HSO's office manager
C. EPL's purchasing department
D. EPL's accounting department
Consider the table below as you respond to the questions:
Which of the following is the best choice for Item A in the table?
A. Initiation/planning
B. Build
C. Implementation
D. Operations and maintenance
Which of the following schools of ethical thought teaches that the most ethical decision
is the one that promotes the greatest good for the greatest number of stakeholders?
A. ethical egoism
B. utilitarianism
C. deontology
D. virtue ethics
Internal control is designed to provide:
A. Certainty.
B. Freedom from fraud.
C. Reasonable assurance.
D. Truth.
Which of the following is an example of the second step in the sales/collection process?
A. A customer completes a form on the Internet.
B. A sales clerk scans the customer's credit card.
C. The accounting department sends an invoice to the customer.
D. The cash receipts department processes the customer's check.
Consider the following short case as you respond to the question:
VLC Corporation sold merchandise with a cost of $200 on account for $300 to PRT
Corporation; credit terms were 2/10, n/30. VLC paid the outgoing freight charge of $10.
PRT paid the invoice within the discount period.
Considering all entries VLC would make in its AIS to record all the preceding
transactions, how many different income statement accounts would be involved?
A. Three
B. Four
C. Five
D. More than five
Differences between legal & regulatory risk and directors' & officers' liability risk in
Brown's taxonomy include:
A. The cause of the risk.
B. The things directly affected by the risk.
C. Both the cause of the risk and the things directly affected by the risk.
D. Neither the cause of the risk nor the things directly affected by the risk.
Bumble Beasley commented: "I understand the benefits of XBRL, but tagging all our
company's journal entries and financial statements is too much work." Which of the
following is the best response to Bumble's comment?
A. XBRL cannot be used to tag journal entries.
B. The tagging process can be automated.
C. Both XBRL cannot be used to tag journal entries and the tagging process can be
automated.
Which of the following schools of ethical thought teaches that individuals have rights
and that ethical principles are developed through reasoning?
A. ethical egoism
B. utilitarianism
C. deontology
D. virtue ethics
Which of the following best pairs a financing process risk with an internal control that
will address the risk?
A. Sending a dividend check to the wrong shareholder, electronic database
B. Falling stock prices due to profit restatements, independent audits
C. Failure to receive IPO approval from the SEC, separation of duties
D. Inability to pay dividends because of a cash shortage, corporate line of credit
The definition of accounting has three principal elements. Which of the following is not
one of them?
A. Distinguishing relevant from irrelevant information
B. Calculating amounts to record in the AIS
C. Reporting financial results
D. Using the information to make informed judgments
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.
The first step in creating a flowchart is to define the system boundary. Which of the
following is most likely to be outside the system boundary?
A. Patrons
B. Theatre personnel
C. Box office
D. Advertising firm
The chapter discussed four schools of ethical thought. Which of the following pairs
includes ideas from a single school?
A. Community is more important than individuality; people within a community should
do what's best for them individually.
B. Community is more important than individuality; people within a community should
do what's best for the community as a whole.
C. Community values cannot change based on circumstances or potential outcomes;
people within a community should do what's best for them individually.
D. Community values cannot change based on circumstances or potential outcomes;
people within a community should do what's best for the community as a whole.
Sam and Dan are the owners of the International School for Computer Training (ISCT),
a for-profit educational institution that provides computer-related education in several
short-term programs. As a first step in developing an internal control plan, they have
identified two risks: (a) employees steal supplies for personal use and (b) failure to
attract a sufficient number of students. Based on those two risks, prepare a risk-control
matrix using the format illustrated in the chapter.
