Accounting Information Systems, 8e – Test Bank, Chapter 1
Chapter 1—The Information System: An Accountant’s Perspective
TRUE/FALSE
1. Information is a business resource.
2. IT outsourcing is location-independent computing.
3. Transaction processing systems convert non-financial transactions into financial transactions.
4. Information lacking reliability may still have value.
5. A balance sheet prepared in conformity with GAAP is an example of discretionary reporting.
6. The Management Reporting System provides the internal financial information needed to manage a
business.
7. Most of the inputs to the General Ledger System come from the Financial Reporting System.
8. When preparing discretionary reports, organizations can choose what information to report and how to
present it.
9. Retrieval is the task of permanently removing obsolete or redundant records from the database.
10. Systems development represents 80 to 90 percent of the total cost of a computer system.
11. The database administrator is responsible for the security and integrity of the database.
12. Custom software is completely finished, tested, and ready for implementation.
13. The internal auditor represents the interests of third-party outsiders.
14. Information Technology (IT) audits can be performed by both internal and external auditors.
15. Custom software is the most affordable systems development option.
16. A database is a collection of interconnected computers and communications devices that allows users to
communicate, access data and applications, and share information and resources.
17. Systems maintenance consumes the majority of a system’s total costs.
18. Cloud computing is a practice in which the organization sells its IT resources to a third-party outsourcing
vendor then leases back IT services from the vendor for a contract period.
19. A potential benefit of cloud computing is that the client firm does not need to know where its data are
bring processed.
20. One of the greatest disadvantages of database systems is that all data is always available to all users.
21. Under SOX legislation public accounting firms are no longer allowed to provide consulting services to
audit clients.
22. Under SOX legislation public accounting firms are no longer allowed to provide consulting services to
their clients.
Accounting Information Systems, 8e – Test Bank, Chapter 1
MULTIPLE CHOICE
1. Which of the following is not a business resource?
a.
raw material
b.
labor
c.
information
d.
all are business resources
2. Which level of management is responsible for short-term planning and coordination of activities
necessary to accomplish organizational objectives?
a.
operations management
b.
middle management
c.
top management
d.
line management
3. Which level of management is responsible for controlling day-to-day operations?
a.
top management
b.
middle management
c.
operations management
d.
executive management
4. Location-independent computing in which shared data centers deliver hosted IT services over the Internet.
a.
IT outsourcing
b.
Network administration
c.
Cloud computing
d.
Custom software
5. The value of information for users is determined by all of the following but
a.
reliability
b.
relevance
c.
convenience
d.
completeness
6. An example of a nonfinancial transaction is
a.
sale of products
b.
cash disbursement
c.
log of customer calls
d.
purchase of inventory
7. An example of a financial transaction is
a.
the purchase of computer
b.
a supplier’s price list
c.
a delivery schedule
d.
an employee benefit brochure
8. Which subsystem is not part of the Accounting Information System?
a.
Transaction Processing System
b.
Expert System
c.
General Ledger/Financial Reporting System
d.
Management Reporting System
9. The major difference between the Financial Reporting System (FRS) and the Management Reporting
System (MRS) is the
a.
FRS provides information to internal and external users; the MRS provides information to
internal users
b.
FRS provides discretionary information; the MRS provides nondiscretionary information
c.
FRS reports are prepared using information provided by the General Ledger System; the
MRS provides information to the General Ledger System
d.
FRS reports are prepared in flexible, nonstandardized formats; the MRS reports are
prepared in standardized, formal formats
10. The purpose of the Transaction Processing System includes all of the following except
a.
converting economic events into financial transactions
b.
recording financial transactions in the accounting records
c.
distributing essential information to operations personnel to support their daily operations
d.
measuring and reporting the status of financial resources and the changes in those
resources
11. The Transaction Processing System includes all of the following cycles except
a.
the revenue cycle
b.
the administrative cycle
c.
the expenditure cycle
d.
the conversion cycle
12. The primary input to the Transaction Processing System is
a.
a financial transaction
b.
an accounting record
c.
an accounting report
d.
a nonfinancial transaction
13. When designing the data collection activity, which type of data should be avoided?
Accounting Information Systems, 8e – Test Bank, Chapter 1
a.
data that is relevant
b.
data that is efficient
c.
data that is redundant
d.
data that is accurate
14. The most basic element of useful data in the database is
a.
the record
b.
the key
c.
the file
d.
the attribute
15. In a database, a complete set of attributes for a single occurrence of an entity class is called
a.
a key
b.
a file
c.
a record
d.
a character
16. Effective information has all of the following characteristics except
a.
relevance
b.
completeness
c.
summarization
d.
structure
17. Database management tasks do not include
a.
summarization
b.
storage
c.
retrieval
d.
deletion
18. The author distinguishes between the Accounting Information System and the management Information
System based on
a.
whether the transactions are financial or nonfinancial
b.
whether discretionary or nondiscretionary reports are prepared
c.
the end users of the reports
d.
the organizational structure of the business
19. Which activity is not part of the finance function?
a.
cash receipts
b.
portfolio management
c.
credit
d.
general ledger
Accounting Information Systems, 8e – Test Bank, Chapter 1
20. Market research and advertising are part of which business function?
a.
materials management
b.
finance
c.
marketing
d.
production
21. Which function manages the financial resources of the firm through portfolio management, banking,
credit evaluation, and cash receipts and disbursements?
a.
accounting
b.
finance
c.
materials management
d.
distribution
22. Which of the following is not part of the accounting function?
a.
managing the financial information resource of the firm
b.
capturing and recording transactions in the database
c.
distributing transaction information to operations personnel
d.
managing the physical information system of the firm
23. The term “accounting independence” refers to
a.
data integrity
b.
separation of duties, such as record keeping and custody of physical resources
c.
generation of accurate and timely information
d.
business segmentation by function
24. In the distributed data processing approach
a.
computer services are consolidated and managed as a shared organization resource
b.
the computer service function is a cost center
c.
the end users are billed using a charge-back system
d.
computer services are organized into small information processing units under the control
of end users
25. Which of the following is not a cloud computing service?
a.
Software as a service
b.
Infrastructure as a service
c.
Network as a service
d.
Platform as a service
26. Data processing does not involve
a.
data control
b.
computer operations
c.
system maintenance
d.
data conversion
27. Attestation services are performed by
a.
external auditors
b.
internal accountants
c.
internal auditors
d.
third-party accountants
28. Which individual is least involved in new systems development?
a.
systems analyst
b.
external auditor
c.
end user
d.
data librarian
29. The objectives of all information systems include all of the following except
a.
support for the stewardship function of management
b.
evaluating transaction data
c.
support for the day-to-day operations of the firm
d.
support for management decision making
30. Which individuals may be involved in the Systems Development Life Cycle?
a.
accountants
b.
systems professionals
c.
end users
d.
all of the above
31. An appraisal function housed within the organization that performs a wide range of services for
management is
a.
internal auditing
b.
data control group
c.
external auditing
d.
database administration
32. Which of the following is not a production support activity?
a.
Maintenance
b.
Marketing
c.
Production planning
d.
Quality control
33. Advantages of cloud computing include all of the following except
a.
Access to whatever computing power is needed
b.
Paying only for what is used
c.
Unknown data processing location
d.
Flexible, short term contracts
34. Motivations for IT outsourcing include each of the following except
a.
IT’s highly technical nature
b.
Long term contracts in IT outsourcing
c.
Expense of IT
d.
Dynamically changing nature of IT
35. These are focuses on the system itself.
a.
Cloud computing
b.
Fraud audits
c.
Substantive tests
d.
Tests of controls
36. What factor conceptually distinguishes external auditing and internal auditing?
a.
Tests of controls
b.
Substantive tests
c.
Education
d.
Constituencies
37. All of the following are external end users except
a.
Cost accountants
b.
Creditors
c.
Stockholders
d.
Tax authorities
38. Useful information must possess all of the following characteristics except
a.
relevance
b.
precision
c.
accuracy
d.
completeness
39. The objectives of an information system include each of the following except
a.
support for the stewardship responsibilities of management
b.
furthering the financial interests of shareholders
c.
support for management decision making
d.
support for the firm’s day–to-day operations
40. Accountants play many roles relating to the accounting information system, including all of the following
except
a.
system users
b.
system designers
c.
system auditors
d.
system converters
SHORT ANSWER
1. Entities outside the organization with a direct or indirect interest in the firm, such as stockholders,
financial institutions, and government agencies, are called ____________________.
2. Location-independent sharingof data centers hosting IT servers over Yhe internet is called
______________________________.
3. Transactions with trading partners include ____________________ and ____________________.
Accounting Information Systems, 8e – Test Bank, Chapter 1
4. A practice in which an organization sells its IT resources and leases them back is called
___________________________________.
5. The task of locating and transferring an existing record from the database for processing is called data
____________________.
= 6. These tests focus on data rather than process: __________________________,
7. Three activities that are part of the finance function are __________________________,
__________________________, and __________________________.
8. Two distinct ways to structure the Data Processing Department are ____________________ and
____________________.
9. Two methods to acquire information systems are to __________________________ and to
__________________________.
10. Audits are conducted by ____________________, ____________________, and
____________________ auditors.
11. Sales of products to customers, purchases of inventory from vendors, and cash disbursements are all
example of __________________________.
12. The three major subsystems of the AIS are _______________________________,
___________________________, and _______________________________.
13. The __________________________ and __________________________ standards that characterize the
AIS clearly distinguish it from the MIS.
14. The transaction processing system is comprised of three cycles: __________________________,
__________________________, and __________________________.
15. The tests that focus on the system itself and how it is designed to reduce risk is called
____________________.
Accounting Information Systems, 8e – Test Bank, Chapter 1
16. Sarbanes-Oxley legislation requires that management designs and implements controls over the entire
financial reporting process. What systems does this include?
17. Why is it necessary to distinguish between AIS and MIS?
18. How has SOX legislation impacted the consulting practices of public accounting firms?
19. What is discretionary reporting?
20. Name the five characteristics of information?
ESSAY
1. Contrast the responsibilities of operations management, middle management, and top management.
Explain the different information needs for each level of management.
2. Explain the difference between data and information.
3. Why do auditors need to understand the organizational structure of the business?
4. Several advantages of cloud computing have been discussed. Discuss at least three.
5. Name and explain the purpose of the three major subsystems of the AIS:
Accounting Information Systems, 8e – Test Bank, Chapter 1
6. What are the three primary functions performed by the transaction processing system?
7. What factors motivate management to outsource IT?
8. Describe the problem of data redundancy.
9. Compare and contrast IT outsourcing and cloud computing.
10. Distinguish between the accounting information system and the management information system.
11. Describe the attest function and its objectives.
12. Why is it important to organizationally separate the accounting function from other functions of the
organization?
13. How does SOX affect the provision of attest and advisory services?
Accounting Information Systems, 8e – Test Bank, Chapter 1
14. What are the similarities and differences between external auditors and internal auditors?
15. What are fraud audits and why have they become more common?