Accounting Information Systems, 7e—Test Bank, Chapter 3
65. Which of the following is an input control?
a.
Reasonableness check
b.
Run-to-run check
c.
Spooling check
d.
Batch check
e.
None are input controls
66. Systems that use a sequential master files employ a backup technique called
a.
Batch check
b.
Destructive update
c.
Grandfather-father-son
d.
Master file backup
e.
None of the above
SHORT ANSWER
1. What are the main issues to be addressed in a business code of ethics required by the SEC?
2. List the four broad objectives of the internal control system.
3. Explain the purpose of the PCAOB
4. What are the five internal control components described in the SAS 78 / COSO framework
5. What are management responsibilities under section 302 and 404?
6. Identify to indicate whether each procedure is a preventive or detective control.
a.
authorizing a credit sale
Preventive
Detective
b.
preparing a bank reconciliation
Preventive
Detective
c.
locking the warehouse
Preventive
Detective
d.
preparing a trial balance
Preventive
Detective
e.
counting inventory
Preventive
Detective
7. A clerk reorders 250 items when the inventory falls below 25 items. This is an example of
__________________________.
8. The internal audit department recalculates payroll for several employees each pay period. This
is an example of __________________________.
9. Locking petty cash in a safe is an example of __________________________.
10. Approving a price reduction because goods are damaged is an example of
__________________________.
11. Using cameras to monitor the activities of cashiers is an example of
__________________________.
12. Not permitting the computer programmer to enter the computer room is an example of
_______________________________.
13. Sequentially numbering all sales invoices is an example of __________________________.
14. What are the five conditions necessary for an act to be considered fraudulent?
15. What is the objective of SAS 99?
16. Distinguish between exposure and risk.
17. Explain the characteristics of management fraud.
18. The text discusses many questions about personal traits of executives which might help
uncover fraudulent activity. What are three?
19. Give two examples of employee fraud and explain how the theft might occur.
20. What are the six broad classes of physical control activities defined by SAS 78?
21. Explain the shell company fraud.
22. Explain the pass through fraud.
23 Explain the Pay and Return scheme.
24. What is check tampering?
25. What are the three broad categories of application controls?
Accounting Information Systems, 7e—Test Bank, Chapter 3
26. How does privacy relate to output control?
27. What are the three categories of processing control?
28. What control issue is related to reentering corrected error records into a batch processing system?
What are the two methods for doing this?
29. Output controls ensure that output is not lost, misdirected, or corrupted and that privacy is not violated.
What are some output exposures or situations where output is at risk?
30. Name four input controls and describe what they test
Accounting Information Systems, 7e—Test Bank, Chapter 3
31. Explain input controls.
32. Name three types of transcription error.
33. Describe two types of transposition error
34. Describe factors that influence the number of backup files needed for each application.
Accounting Information Systems, 7e—Test Bank, Chapter 3
ESSAY
1. The text describes six internal control activities. List four of them and provide a specific
example of each one.
2. Contrast management fraud with employee fraud.
3. What is the relationship between COSO and SAS 78? How are they similar/different?
Accounting Information Systems, 7e—Test Bank, Chapter 3
4. Why are the computer ethics issues of privacy, security, and property ownership of interest to
accountants?
5. According to common law, there are five conditions that must be present for an act to be
deemed fraudulent. Name and explain each.
6. Management fraud is regarded as more serious than employee fraud. Three special
characteristics have been discussed for management fraud. What are they? Explain.
7. Four principal types of corruption are discussed. Name all four and explain at least two.
8. Misappropriation of assets can involve various schemes: expense reimbursement fraud,
lapping, and payroll fraud. Explain each and give an example.
9. Distinguish between skimming and cash larceny. Give an example of each
10. Explain why collusion between employees and management in the commission of a fraud is
difficult to both prevent and detect.
11. Since all fraud involves some form of financial misstatement, how is Fraudulent Statement
fraud different?
12. Explain the problems associated with lack of auditor independence.
13. Explain the problems associated with lack of director independence
14. Explain the problems associated with Questionable Executive Compensation Schemes
15. Explain the problems associated with inappropriate accounting practices.
16. Explain the purpose of the PCAOB.
17. Why is an Independent Audit Committee important to a company?
18. What are the key points of the “Issuer and Management Disclosure” of the Sarbanes–Oxley
Act?
19. In this age of high technology and computer based information systems, why are accountants
concerned about physical (human) controls?
20. How has the Sarbanes-Oxley Act had a significant impact on corporate governance?
21. Discuss the non accounting services that external auditors are no longer permitted to render to
audit clients under SOX legislation.
22. What are the key points of the section 404 of the Sarbanes-Oxley Act?
23. Describe the factors that constitute the fraud triangle. Why is it important to auditors?
24. Define each of the following input controls and give an example of how they may be used:
a. Missing data check
b. Numeric/alphabetic data check
c. Limit check
d. Range check
e. Reasonableness check
f. Validity check
Accounting Information Systems, 7e—Test Bank, Chapter 3
25. After data is entered into the system, it is processed. Processing control exists to make sure that the
correct things happen during processing. Discuss processing controls.
26. If input and processing controls are adequate, why are output controls needed?
27. Explain the grandfather-father-son backup technique.