CHAPTER 1
THE INFORMATION SYSTEM: AN ACCOUNTANT’S PERSPECTIVE
REVIEW QUESTIONS
1. Operational, operations management, middle management, and top management. Horizontal
flows support operation-level tasks. The information is highly detailed about the day-to-day operations.
2. Data are facts that are collected in a “raw” form and made meaningful through processes such
3. AISs process financial transactions and certain nonfinancial transactions that directly affect the
processing financial transactions. The external financial reporting documents of AIS are subject to legal
and professional standards. Consequently, management and accountants have greater legal
5. Reports used by management, which the company is not obligated by law, regulation, or
10. Feedback is output that is sent back to the system as a source of data. Feedback is useful because
12. Stewardship is the responsibility of management to properly utilize the resources of the firm
13. a. Materials Management
b. Production
c. Marketing
d. Distribution
e. Personnel
f. Finance
g. Accounting
h. Computer Service
14. Internal auditors are responsible for in-house appraisal of the financial reporting system. Internal
auditors are concerned with deterring and detecting fraud and for conducting EDP audits. External
16. The role of the accounting function is to manage the financial information resources of the firm.
First, the accountants must capture and record business events of a firm and their financial impact.
17. In a centralized data processing approach, the computer services function is centrally located. The
databases are housed in one place where all of the data processing occurs by one or more main
computers. All systems development and maintenance work for the entire organization is performed by
systems professionals. End users wishing to have new systems or features must submit a formal request
18. Data processing is organized around several information processing units, which are distributed
19. Enterprise Resource Planning (ERP) is an information system model that enables an organization
to automate and integrate its key business processes. ERP breaks down traditional functional barriers
22. Financial Services (Advisory Services) pertains to professional services that are designed to
improve the quality of information, both financial and non-financial, used by decision makers. The
domain of advisory services is intentionally unbounded so that it does not inhibit the growth of future
23. IT auditing is part of a broader financial audit in which the auditor attests to the integrity of
24. The conceptual system must first be determined. It specifies the nature of the information
required, how and when it is to be collected, and who is the user. For each conceptual system, many
25. The audit committee of the board of directors of publicly traded companies is a subcommittee
that has special responsibilities regarding audits.The audit committee is usually composed of three
people who should be outsiders (not associated with the families of executive management nor former
officers, etc.). With the advent of the Sarbanes-Oxley Act, at least one member of the audit committee
26. Sometimes fraud audits are initiated when corporate management suspects employee fraud.
27. The independence and competence of the internal audit staff determine the extent to which
external auditors may cooperate with and rely on work performed by internal auditors. Some internal
audit departments report directly to the controller. Under this arrangement, the internal auditor’s
independence is compromised, and the external auditor is prohibited by professional standards from
29. The characteristic that conceptually distinguishes external auditors from internal auditors is their
30. Network administration is responsible for the effective functioning of the software and hardware
that constitute the organization’s network. This involves configuring, implementing, and maintaining
31. Cloud computing, a variant of IT outsourcing, is location-independent computing whereby shared
data centers deliver hosted IT services over the Internet. These services fall into three categories:
software as a service (SaaS), infrastructure as a service (IaaS), and platform as a service (PaaS). An
32. Organizations acquire information systems in two ways: they purchase commercial software
33. Custom systems are more expensive than commercial packages because the organization must
36. The designer must understand the nature of a particular audit risk before he or she can plan the
design of internal control techniques needed to mitigate the risk. Also, the designer must understand