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Which of the following balance sheet items are commonly associated with the
acquisition/payment process?
A. Inventory and accounts payable
B. Purchases and accounts receivable
C. Cash paid to vendors
D. Cash received from the sale of inventory
The chapter discussed five types of ASPs: (a) enterprise, (b) local/regional, (c)
specialist, (d) vertical market and (e) volume business.
Which of the five types best describes each of the following?
1> Attendance and vacation tracking for small businesses in St Louis
2> Credit card processing for retail department stores
3> Diverse IT-related services for mid-range businesses in Shreveport
4> ERP systems
5> Online employee training
6> Payroll processing for banks and other financial institutions
7> Pension fund management
8> Recruiting executives for the Fortune 500
9> Several marketing-related services for small business
10> Small business general ledger software in Dallas
An auditor is concerned that her company's purchasing process is not functioning as
efficiently as possible. Which type of audit will best address her concern?
A. Financial
B. Operational
C. Management
D. Purchasing
Missouri Can Corporation (MCC) manufactures and sells a variety of can types, such as
soft drink cans, oil cans and many others. MCC has adopted a functional organization
structure that includes departments for accounting, marketing, manufacturing, human
resources and information systems. MCC's manufacturing department is subdivided
into fabrication and finishing; the fabrication function manufactures generic cans, while
the finishing function customizes those cans for specific customers. If a journal entry in
MCC's accounting information system includes a credit to "work in process€finishing,"
the corresponding debit is likely to be:
A. work in process€fabrication
B. cost of goods sold
C. finished goods
D. cash
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.
One important step in conducting an audit is the evaluation of internal controls; one
step in creating a knowledge management system is the creation of a visual map. If
Amanda wanted to create a visual map focused on internal control, it could be
organized into which of the following categories?
A. General and application
B. Physical, technical and administrative
C. Safeguarding assets, promoting operational efficiency, ensuring reliable financial
reporting and encouraging compliance with management directives
D. Any of these
Following the principles and enablers of COBIT will enable organizations to better:
A. apply the systems development life cycle.
B. address all elements of the C-I-A triad.
C. focus on technical controls, since they are generally more important than physical
and administrative controls.
D. ensure that they address all categories of Brown's risk taxonomy.
Fill in the blanks below for common transactions processed in the conversion, human
resource and financing business process.
a. __________________________________ b.
__________________________________ c. __________________________________
d. __________________________________ e.
__________________________________ f. __________________________________
Consider the following short case as you respond to the question:
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's bank account 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.
Which of the following techniques could be used to document ELM's sales/collection
process?
A. Systems flowchart
B. Data flow diagram
C. REA model
D. All of these
Consider the following information items as you respond to the question:
i. Customer master file
ii. Journal entry to record the receipt of cash
iii. Pre-numbered documents
iv. Schedule of accounts receivable
Accounting information systems have five generic elements, one of which can be
directly applied to the other four. Which information item above best exemplifies that
element?
A. Customer master file as an output of the AIS
B. Journal entry to record the receipt of cash as a process of the AIS
C. Pre-numbered documents as an internal control in the AIS
D. None of these.
Missouri Can Corporation (MCC) manufactures and sells a variety of can types, such as
soft drink cans, oil cans and many others. MCC has adopted a functional organization
structure that includes departments for accounting, marketing, manufacturing, human
resources and information systems. Which of the following departments deal with
primary activities in Porter's value chain?
A. accounting and human resources
B. marketing and manufacturing
C. accounting and marketing
D. human resources and manufacturing
Financial statement audits typically involve five generic steps. Number the steps below
in the order of their occurrence based on the discussion in the chapter.A. Review the
internal control system.B. Issue the audit report.C. Assess management's integrity.D.
Perform compliance testing.E. Evaluate management's credentials.
Laurie and Milton are concerned about the risks created by inefficiency in the
company's current fixed asset purchasing process. They could address their concern by
developing: (i) an enterprise risk management plan, (ii) a business process management
plan.
A. I only
B. II only
C. Both I and II
D. Neither I nor II
The COSO enterprise risk management framework comprises eight sections, one of
which is objective setting. COSO identified five types of objectives most organizations
should consider in developing an ERM plan. "Completing SEC filings within thirty
days of the fiscal year end" is an example of a ___ objective.
A. Strategic
B. Reporting
C. Risk management
D. Control activity
Shawn is an accountant at LNT Corporation. He maintains the company's accounting
data on his computer's local hard drive, but does not back it up on any regular schedule.
LNT Corporation's risk is most related to which purpose of internal control?
A. Safeguarding assets
B. Ensuring financial statement reliability
C. Encouraging compliance with management directives
D. Properly backing up data every day
Consider the following systems flowchart as you respond to the question:
Based on the flowchart, which of the following statements is most true?A. The
company does not use any form of information technology in the process depicted.
B. At least three tasks are completed manually.
C. Both the company does not use any form of information technology in the process
depicted and at least three tasks are completed manually are true.
D. Neither the company does not use any form of information technology in the process
depicted nor at least three tasks are completed manually is true.
Understanding business processes can link auditing to accounting information systems.
Which of the following can facilitate an understanding of business processes?
A. Flowcharts
B. The capability maturity model
C. Both flowcharts and the capability maturity model
D. Neither flowcharts nor the capability maturity model
Consider the following diagram as you answer the questions:
The most appropriate label for "A" is:
A. applicant
B. application materials
C. submit application materials
D. some other label
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.
Column B is most closely related to the ___ part of the COSO framework.
A. second
B. third
C. fourth
D. last
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 relapse errors?A. Jorge onlyB. Maria onlyC.
Both Jorge and MariaD. Neither Jorge nor Maria
Bonnie is the owner of Doggie Day Care, a pet-sitting service. Pet owners bring their
dogs to Bonnie's facility, where they are either given private accommodations or are put
in a large pen with other dogs. (Private accommodations are more expensive.) Bonnie
and her employees feed the dogs twice a day; those dogs in private accommodations are
also given two exercise periods per day. Owners pay half the daily fee at the start of the
day, and the other half when they pick up the dog at the end of the day; owners must
also certify that their dogs have had all required vaccinations. As Bonnie's company is a
day care service, no dogs stay the night in her facility. Bonnie accepts cash, checks and
major credit cards in payment. Bonnie is interested in developing a comprehensive
internal control plan for Doggie Day Care; she has approached you, as a consultant, for
assistance. Use the COSO internal control framework to develop an internal control
plan for Bonnie. Ensure that your plan includes sufficient detail that Bonnie can
implement it as you intend.
Although CPK Corporation had a process for paying vendor invoices, Lindsay thought
it didn't work well. So, she used her own system without telling her supervisor or
co-workers. Assume the process would be classified as "chaotic" using the capability
maturity model. For each subsequent level of the CMM, suggest one action Lindsay
should take to improve the process.
Accounting information systems have five generic elements. Identify and describe one
example of each element in the sales/collection process of Homemade Crafts Company
based on the following narrative:
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.
In your own words, define "accounting information system."
List and discuss two similarities and two differences between AIS and other areas of
accounting.
Accounting information systems have five generic elements. Identify and describe two
examples of each element in the acquisition/payment process of PTW Corporation
based on the following narrative:
PTW Corporation sells computer peripherals and related devices, such as printers, ink,
flash drives and cables. PTW has a staff of three purchasing agents, each of whom is in
charge of a specific set of inventory items. Each purchasing agent uses his/her
discretion in making decisions about when to order inventory, how much inventory to
order and which vendor to purchase from. When ordered inventory arrives at PTW, one
of two receiving clerks matches the items, quantities and vendors against a copy of the
purchase order, then either stocks the merchandise on the shelves or puts it in the
storeroom. PTW's accountant receives a copy of the invoice from the vendor, as well as
an e-mail from one of the receiving clerks indicating that merchandise has been
received. The e-mail also includes the relevant purchase order number. The accountant
files the invoice by date in a filing cabinet; once a week, the accountant removes
invoices from the filing cabinet and pays them by check. To cut down on clutter in the
office, the accountant shreds the vendor invoice after the check has been paid by the
bank. The accountant also completes a bank reconciliation within two weeks of
receiving the bank statement in the mail.
Which of the following statements are true based on the REA model provided?
__ A sales transaction may involve five different inventory items.
__ All employees are in the sales department.
__At least one foreign key will be present in the 'sell inventory" table.
__ Every customer is assigned a specific sales representative.
__ Human error risk is likely to be a concern for this company.
__ Multiple junction tables will be required to implement the REA model in a database.
__ Some inventory items may sit in the warehouse indefinitely.
__ The 'sell inventory" table will have a compound primary key.
__ The company appropriately segregates duties.
__ The company may be exposed to credit risk.
Prepare a narrative description of the business process illustrated in the REA model
below.
Several journal entries common to the acquisition/payment process are listed below. For
each, explain what transaction the entry is recording.
In your own words, explain the role and purpose of the acquisition/payment process. Do
not list the steps in the process as part of your response.
