full le at hp://testbankeasy.com Chapter 1—The Information System: An Accountant’s Accountant’s Perspective
TRUE/A!SE 1. Inform Informati ation on is a busine business ss resou resource rce.. ANS: T PTS: 1 2. IT outsou outsourcing rcing is locatio location-in n-indepen dependent dent computing computing.. ANS: F PTS: 1 3. Transaction Transaction processing processing sstems con!ert non-financial transactions into financial transactions. ANS: F PTS: 1 ". Informatio Information n lac#ing lac#ing reliabi reliabilit lit ma ma still still $a!e $a!e !alue. !alue. ANS: F PTS: 1 %. A balance s$eet prepared in conformit &it$ &it$ 'AAP is an e(ample e(ample of discretionar discretionar reporting. ANS: F PTS: 1 ). T$e *anagement *anagement +eporting Sstem pro!ides pro!ides t$e internal financial financial information information needed needed to manage a business. ANS: T PTS: 1 ,. *ost of t$e inputs inputs to t$e 'eneral 'eneral edger edger Sstem Sstem come from t$e Financia Financiall +eporting +eporting Sstem. Sstem. ANS: F PTS: 1 . /$en preparing preparing discretionar discretionar reports0 organiations can c$oose &$at information information to report report and $o& $o& to present it. ANS: T PTS: 1 . +etrie!al +etrie!al is t$e tas# tas# of permanentl permanentl remo!in remo!ing g obsolete obsolete or redundant redundant records records from from t$e database. database. ANS: F PTS: 1 1. Sstems Sstems de!elopment de!elopment represen represents ts to percent percent of t$e total cost cost of a computer sstem. sstem. ANS: F PTS: 1 11. T$e database database administrator administrator is responsible for t$e securit and integrit integrit of t$e database. database. ANS: T PTS: 1 12. 4ustom 4ustom soft&are soft&are is completel completel finis$ed finis$ed00 tested0 tested0 and read for implement implementatio ation. n. ANS: F PTS: 1 13. T$e internal internal auditor auditor represen represents ts t$e interests interests of t$ird-p t$ird-part art outside outsiders. rs. ANS: F PTS: 1 1". Information Tec$nolog 5IT6 5IT6 audits can be performed performed b bot$ bot$ internal and e(ternal auditors. ANS: T PTS: 1 1%. 4ustom 4ustom soft&are soft&are is t$e most most affordabl affordablee sstems sstems de!elopme de!elopment nt option. option. ANS: F PTS: 1 1). A database is a collection of interconnected interconnected computers and communications communications de!ices de!ices t$at allo&s allo&s users to communicate0 access data and applications0 and s$are information and resources. ANS: F PTS: 1 1,. Sstems Sstems maintenanc maintenancee consumes consumes t$e ma7orit ma7orit of of a sstem8s sstem8s total costs costs.. ANS: T PTS: 1 1. 4loud computing computing is a practice in &$ic$ t$e organiation sells its IT resources resources to a t$ird-part outsourcing outsourcing !endor t$en leases bac# IT ser!ices from t$e !endor for a contract period. ANS: F PTS: 1 1. A potential benefit benefit of cloud computing computing is t$at t$at t$e client firm does not need to #no& &$ere its data data are bring processed. ANS: F PTS: 1 2. 9ne of t$e t$e greatest disad!antages of database sstems is t$at all data is al&as a!ailable a!ailable to all all users. ANS: F PTS: 1 full le at hp://testbankeasy.com
full le at hp://testbankeasy.com 21. nder S9; legislation public accounting accounting firms are no longer longer allo&ed to pro!ide pro!ide consulting consulting ser!ices to audit clients. ANS: T PTS: 1 22. nder S9; legislation public accounting accounting firms are no longer longer allo&ed to pro!ide pro!ide consulting consulting ser!ices to t$eir clients. ANS: F N9T<: T$e ma not not pro!ide suc$ ser!ices ser!ices to audit clients0 clients0 but ma still pro!ide pro!ide t$em to non-audit clients PTS: 1 "U!TIP!E C#$ICE 1. Which of the the follow following ing is not a business business resour resource? ce? a. ra& ra& material b. labor c. information d. all all are are busi busine ness ss res resou ourc rces es
ANS: = PTS: 1 2. Which level level of management management is responsible responsible for shortterm shortterm planning planning an! coor!ina coor!ina"on "on of ac"vi"es necessary to accomplish organi#a"onal organi#a"onal ob$ec"ves? a. oper operat atio ions ns mana manage geme ment nt b. middle management c. top top mana manag gemen ementt d. line line man manag agem emen entt ANS: > PTS: 1 %. Which level level of management management is responsible responsible for controll controlling ing !ayto! !ayto!ay ay opera"on opera"ons? s? a. top top mana manag gemen ementt b. middle management c. oper operat atio ions ns mana manage geme ment nt d. e(ec e(ecut uti! i!ee mana manage gemen mentt ANS: 4 PTS: 1 ". ocation-independent ocation-independent computing computing in &$ic$ s$ared data centers deli!er $osted $osted IT ser!ices o!er t$e Internet. a. IT outs outso ourc urcing ing b. Net&or# administration administration c. 4lou 4loud d co compu mputing ting d. 4us 4ustom tom soft soft&a &are re ANS: 4 PTS: 1 &. 'he value value of informa informa"on "on for users users is !etermin !etermine! e! by all of the the following following but but a. rel reliabilit b. rele!ance c. con!enience d. comp comple lete ten ness ess ANS: 4 PTS: 1 (. )n e*ampl e*ample e of a nonn nonnancia anciall transac" transac"on on is a. sal sale of of pro prod ducts ucts b. cas$ disbursement c. log log of of cus custo tome merr cal calls ls d. purc purc$a $ase se of in!e in!ent ntor or full le at hp://testbankeasy.com
full le at hp://testbankeasy.com ANS: 4 PTS: 1 +. )n e*am e*ample ple of of a nanci nancial al trans transac" ac"on on is a. t$e t$e pur purc$ c$as asee of of com compu pute ter r b. a supplier8s price list list c. a del deli! i!er er sc$ sc$ed edul ulee d. an emplo emploee ee benefi benefitt broc$u broc$ure re ANS: A PTS: 1 ,. Which subs subsyst ystem em is not part part of the )ccoun )ccoun"ng "ng -nforma" -nforma"on on ystem ystem? ? a. Trans Transact action ion Proces Processin sing g Sstem Sstem b. <(pert Sstem c. 'enera 'enerall edger? edger?Fin Financ ancial ial +epor +eportin ting g Sstem Sstem d. *anag *anagem emen entt +epor +eporti ting ng Sste Sstem m ANS: > PTS: 1 . 'he ma$or !i0er !i0erence ence between between the inancial inancial epor"ng epor"ng ystem ystem 34 an! an! the 5anagement 5anagement epor"ng epor"ng ystem 354 is the a. F+S pro!ides pro!ides informat information ion to interna internall and e(ternal e(ternal users@ users@ t$e *+S *+S pro!ides pro!ides informat information ion to internal users b. F+S pro!ides discretionar discretionar information@ t$e *+S pro!ides pro!ides nondiscretionar nondiscretionar information c. F+S reports reports are prepared prepared using using informat information ion pro!ided pro!ided b b t$e 'eneral 'eneral edger edger Sstem@ Sstem@ t$e *+S pro!ides information to t$e 'eneral edger Sstem d. F+S reports reports are prepared prepared in fle(ib fle(ible0 le0 nonstanda nonstandardie rdied d formats@ formats@ t$e *+S reports reports are prepared in standardied0 standardied0 formal formats ANS: A PTS: 1 16. 'he purpose of the 'ransac"on 7rocessing ystem ystem inclu!es all of the following following e*cept a. con!erting con!erting economic economic e!ents e!ents into into financ financial ial trans transactio actions ns b. recording financial transactions transactions in t$e accounting accounting records c. distribut distributing ing essentia essentiall information information to operations operations personne personnell to support t$eir t$eir dail operation operationss d. measuring measuring and report reporting ing t$e statu statuss of financial financial resource resourcess and t$e c$anges c$anges in t$ose t$ose resources ANS: = PTS: 1 11. 'he 'ran 'ransac"on sac"on 7rocess 7rocessing ing ystem ystem inclu!es inclu!es all of the followi following ng cycles e*cept e*cept a. t$e t$e re! re!en enu ue cc ccle le b. t$e administrati!e ccle ccle c. t$e t$e e(pe e(pend ndit itur uree ccl cclee d. t$e t$e con! con!er ersi sion on ccl cclee ANS: > PTS: 1 12. 'he primary primary input input to the 'ran 'ransac"on sac"on 7roces 7rocessing sing yst ystem em is a. a fin finan anci cial al tran transa sact ctio ion n b. an accounting record c. an acc accou ount ntin ing g rep repor ortt d. a nonfi nonfina nanc ncia iall trans transac acti tion on ANS: A PTS: 1 1%. When !esignin !esigning g the !ata collec"on collec"on ac"vity ac"vity88 which type of !ata !ata shoul! be avoi!e! avoi!e!? ? a. data data t$at t$at is is rel rele! e!an antt b. data t$at is efficient efficient c. data data t$at t$at is redu redund ndan antt d. data data t$at t$at is accu accura rate te full le at hp://testbankeasy.com
full le at hp://testbankeasy.com ANS: 4 PTS: 1 19. 'he most most basic basic element element of of useful useful !ata !ata in the !atabas !atabase e is a. t$e re record b. t$e #e c. t$e file d. t$e t$e attr attrib ibut utee ANS: = PTS: 1 1&. -n a !atabase8 !atabase8 a complet complete e set of aribute aributess for a single single occurrence occurrence of an en"ty en"ty class is calle! calle! a. a #e b. a file c. a record d. a c$aracter ANS: 4 PTS: 1 1(. 0ec"ve 0ec"ve informa informa"on "on has all of the followi following ng characteris characteris"cs "cs e*cept e*cept a. rele!ance b. completeness c. sum summar mariat iatio ion n d. structure ANS: = PTS: 1 1+. ;atabase ;atabase management management tasks tasks !o not inclu!e inclu!e a. sum summar mariat iatio ion n b. storage c. retrie!al d. deletion ANS: A PTS: 1 1,. 'he author !is"nguishes between the )ccoun"ng -nforma"on -nforma"on ystem an! the management -nforma"on -nforma"on ystem base! on a. &$et$er &$et$er t$e t$e transa transaction ctionss are are financia financiall or nonfinan nonfinancial cial b. &$et$er discretionar or nondiscretionar reports reports are prepared c. t$e t$e end end use users rs of t$e t$e repo report rtss d. t$e organia organiation tional al struct structure ure of t$e t$e busin business ess ANS: A PTS: 1 1. Which ac"vity ac"vity is is not part of the the nance nance func"on? func"on? a. cas$ re receipts b. portfolio management c. credit d. gene generral led ledger ger ANS: = PTS: 1 26. 5arket 5arket research research an! an! a!ver"sin a!ver"sing g are part of of which busine business ss func"on? func"on? a. mate materi rial alss manag managem emen entt b. finance c. mar#eting d. production ANS: 4 PTS: 1 21. Which func"on func"on manages manages the nancial nancial resourc resources es of the rm through through por
full le at hp://testbankeasy.com b. finance c. mate materi rial alss manag managem emen entt d. dis distri tributi bution on ANS: > PTS: 1 22. Which of the follo following wing is not part part of the the accoun"n accoun"ng g func"on? func"on? a. managing managing t$e t$e finan financial cial informati information on resour resource ce of of t$e firm b. capturing and recording recording transactions in t$e t$e database c. distribut distributing ing transa transactio ction n informati information on to operat operations ions personnel personnel d. managing managing t$e t$e p$sic p$sical al informat information ion sste sstem m of t$e t$e firm firm ANS: = PTS: 1 2%. 'he term =accoun =accoun"ng "ng in!epe in!epen!enc n!ence> e> refer referss to a. data data integr tegrit it b. separation of duties0 duties0 suc$ as record #eeping and custod custod of p$sical resources resources c. genera generatio tion n of accurat accuratee and timel timel inform informati ation on d. busine business ss segm segment entati ation on b b funct function ion ANS: > PTS: 1 29. -n the the !istri !istribute! bute! !ata !ata processi processing ng approa approach ch a. computer computer ser!ices ser!ices are consol consolidate idated d and managed managed as a s$ared s$ared organia organiation tion resourc resourcee b. t$e computer ser!ice function function is a cost center c. t$e end end users users are billed billed using using a c$arge-b c$arge-bac# ac# sstem sstem d. computer computer ser!ices ser!ices are organied organied into into small informatio information n processing processing units units under t$e control control of end users ANS: =
PTS: 1
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full le at hp://testbankeasy.com 2%. /$ic$ of t$e follo&in follo&ing g is not not a cloud cloud computi computing ng ser!ice ser!ice a. Soft Soft&a &are re as a ser ser!i !ice ce b. Infrastructure as a ser!ice c. Net& Net&or or# # as as a ser! ser!ic icee d. Plat Platfo form rm as as a ser ser! !ice ice ANS: 4 PTS: 1 2). 2). =ata =ata pro proce cess ssin ing g does does not involve not involve a. data control b. computer operations c. sst sstem em main mainte tena nanc ncee d. data data co con!er n!erssion ion ANS: 4 PTS: 1 2,. 2,. Attest Attestati ation on ser!ic ser!ices es are performe! by a. e(te e(tern rnal al audi audito tors rs b. internal accountants accountants c. inte intern rnal al audi audito tors rs d. t$ir t$irdd-pa part rt accou account ntan ants ts ANS: A PTS: 1 2,. Which in!ivi in!ivi!ual !ual is least least invol involve! ve! in new syst systems ems !evelopm !evelopment? ent? a. ss sstems ems ana anallst b. e(ternal auditor c. end user d. data data libra ibrari rian an ANS: = PTS: 1 2. 'he ob$ec"ves ob$ec"ves of all informa informa"on "on systems systems inclu!e inclu!e all of the followi following ng e*cept e*cept a. support support for for t$e t$e ste&ar ste&ards$i ds$ip p functi function on of of manageme management nt b. e!aluating transaction transaction data c. support support for for t$e t$e da-to da-to-da -da operation operationss of of t$e t$e firm firm d. suppor supportt for mana managem gement ent deci decisio sion n ma#ing ma#ing ANS: > PTS: 1 %6. Which in!ivi in!ivi!uals !uals may may be involve! involve! in the ystems ystems ;evelopm ;evelopment ent ife ife @ycle? a. accountants b. sstems professionals professionals c. end users d. all all of of t$ t$e ab abo!e o!e ANS: =
PTS: 1
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full le at hp://testbankeasy.com %1. )n appraisal appraisal func"on func"on house! house! within within the organi#a organi#a"on "on that performs performs a wi!e range range of services for for management is a. inte intern rnal al audi auditi ting ng b. data control group c. e(te e(tern rnal al audi auditi ting ng d. data databa base se adm admin inis istr trat atio ion n
ANS: A PTS: 1 32. /$ic$ of t$e follo& follo&ing ing is not not a productio production n support support acti!it acti!it a. *ai *aintenance b. *ar#eting c. Prod Produc ucti tion on pla plann nnin ing g d. Bual Bualit it con control trol ANS: > PTS: 1 33. 33. Ad!ant Ad!antage agess of cloud cloud comp comput uting ing inclu!e all of the following e*cept a. Access Access to to &$ate! &$ate!er er compu computin ting g po&er po&er is neede needed d b. Paing onl for &$at is used used c. n#no& n#no&n n data data proces processin sing g loca locatio tion n d. Fle(ib Fle(ible0 le0 s$ort s$ort term term cont contrac racts ts ANS: 4 PTS: 1 3". 3". *oti!a *oti!atio tions ns for for IT outs outsour ourcin cing g inclu!e each of the following e*cept a. IT8s IT8s $ig$ $ig$l l tec$ni tec$nical cal nature nature b. ong term contracts in IT outsourcing c. <(pense of IT d. =nami =namical call l c$an c$angin ging g natur naturee of IT ANS: > PTS: 1 3%. 3%. T$ese T$ese are are focuses focuses on on t$e sst sstem em itsel itself. f. a. 4lou 4loud d co compu mputing ting b. Fraud audits c. Subs Substa tant nti! i!ee test testss d. Tests ests of cont contro rols ls ANS: = PTS: 1 3). /$at factor factor conceptuall conceptuall distingu distinguis$e is$ess e(ternal auditing auditing and internal internal auditing auditing a. Tests ests of cont contro rols ls b. Substanti!e tests c.
PTS: 1
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full le at hp://testbankeasy.com %+. )ll of of the followi following ng are are e*ternal e*ternal en! users users e*cept e*cept a. 4ost 4ost acco accoun unta tant ntss b. 4reditors c. Stoc#$olders d. Ta( aut$ aut$or orit itie iess
ANS: A PTS: 1 %,. Aseful Aseful informa" informa"on on must possess possess all of the followi following ng characteri characteris"cs s"cs e*cept e*cept a. rele!ance b. precision c. accurac d. comp comple lete ten ness ess ANS: > PTS: 1 %. 'he ob$ec"ves ob$ec"ves of an info informa" rma"on on system system inclu!e inclu!e each of the the following following e*cept e*cept a. support support for for t$e ste&ards$ ste&ards$ip ip respons responsibil ibilities ities of manage management ment b. furt$ering t$e financial interests of s$are$olders s$are$olders c. suppor supportt for for manage managemen mentt decis decision ion ma#ing ma#ing d. support support for for t$e t$e firm8 firm8ss da-to da-to-da -da operation operationss ANS: > PTS: 1 96. )ccountants )ccountants play many roles roles rela"ng to the accoun"ng accoun"ng informa"on informa"on system8 system8 inclu!ing inclu!ing all of of the following following e*cept a. sstem users b. sstem designers c. ss sstem audi audittors ors d. sst sstem em con! con!er erte ters rs ANS: =
PTS: 1
S#$RT A%S&ER 1.
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full le at hp://testbankeasy.com %. T$e tas# of locating and transferring transferring an e(isting e(isting record from t$e database database for processing is is called data CCCCCCCCCCCCCCCCCCCC. CCCCCCCCCCCCCCCCCCCC. ANS: retrie!al PTS: 1 T$ese tests focus on data rat$er rat$er t$an process: process: CCCCCCCC CCCCCCCCCCCC CCCCCCCC CCCCCCCCC CCCCCCCCC CCCCC0 C0 B ). T$ese ANS: Substanti!e tests PTS: 1 ,. T$ree acti!it acti!ities ies t$at are part of t$e finance finance function function are CCCCCCCCCC CCCCCCCCCCCCCC CCCCCCCC CCCCCCCCC CCCCCCCC0 CCC0 CCCCCCCCCCCCCCCCCCCCCCCCC CCCCCCCCCCCCCCCCCCCCCCCCCC0 C0 and CCCCCCCCCCCCCCCCCCCCCCCC CCCCCCCCCCCCCCCCCCCCCCCCCC. CC. ANS: portfolio management0 management0 treasur0 treasur0 credit0 cas$ disbursements0 disbursements0 cas$ receipts PTS: 1 . T&o distinct distinct &as to structure structure t$e =ata Processing Processing =epartment =epartment are CCCCCCCCCCCCCCCCCCCC CCCCCCCCCCCCCCCCCCCC and CCCCCCCCCCCCCCCCCCCC. CCCCCCCCCCCCCCCCCCCC. ANS: centralied0 distributed PTS: 1
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full le at hp://testbankeasy.com . T&o met$ods to acEuire acEuire information information sstems sstems are to CCCCCCCCCCCCCCCCC CCCCCCCCCCCCCCCCCCCCCCCCCC CCCCCCCCC and to CCCCCCCCCCCCCCCCCCCCCCCCC CCCCCCCCCCCCCCCCCCCCCCCCCC. C. ANS: de!elop customied sstems0 purc$ase commercial sstems PTS: 1 1. Audits Audits are conducted conducted b CCCCCCCCCCCC CCCCCCCCCCCCCCCC CCCCCCCC CCCC00 CCCCCCCCCCC CCCCCCCCCCCCCCC CCCCCCCCC CCCCC00 and CCCCCCCCCCCCCCCCCCCC CCCCCCCCCCCCCCCCCCCC auditors. auditors. ANS: internal0 e(ternal0 IT PTS: 1 11. Sales of products products to customers0 purc$ases purc$ases of in!entor in!entor from !endors0 and cas$ disbursements disbursements are all e(ample of CCCCCCCCCCCCCCCCCCCCCCCCCC CCCCCCCCCCCCCCCCCCCCCCCCCC.. ANS: financial transactions PTS: 1 12. T$e t$ree ma7or ma7or subsstems subsstems of t$e AIS AIS are CCCCCCCCCCC CCCCCCCCCCCCCCCC CCCCCCCCC CCCCCCCC CCCCCCCCC CCCCCCC0 CC0 CCCCCCCCCCCCCCCCCCCCCCCCC CCCCCCCCCCCCCCCCCCCCCCCCCCC0 CC0 and CCCCCCCCCCCCCCCCCCCCCCC CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC. CCCCCCCC. ANS: t$e transaction processing sstem0 t$e general ledger?financial reporting sstem0 t$e management reporting sstem PTS: 1 13. T$e CCCCCCCCCCCCCCC CCCCCCCCCCCCCCCCCCCCCCCCCC CCCCCCCCCCC and CCCCCCCCCCCCCCCC CCCCCCCCCCCCCCCCCCCCCCCCCC CCCCCCCCCC standards t$at c$aracterie c$aracterie t$e t$e AIS clearl distinguis$ it from t$e *IS. ANS: legal0 professional PTS: 1 1". T$e transaction transaction processing sstem is comprised comprised of of t$ree ccles: CCCCCCCCCCCCCCCCCCCCCCCC CCCCCCCCCCCCCCCCCCCCCCCCCC0 CC0 CCCCCCCCCCCCCCCCCCCCCCCCC CCCCCCCCCCCCCCCCCCCCCCCCCC0 C0 and CCCCCCCCCCCCCCCCCCCCCCCC CCCCCCCCCCCCCCCCCCCCCCCCCC. CC. ANS: re!enue0 e(penditure0 con!ersion PTS: 1 1%. T$e tests tests t$at focus focus on t$e sstem sstem itself itself and and $o& it is designe designed d to reduce reduce ris# is called called CCCCCCCCCCCCCCCCCCCC. CCCCCCCCCCCCCCCCCCCC. ANS: Tests of controls PTS: 1 1). Sarbanes-9(le legislation reEuires t$at management management designs designs and implements controls controls o!er o!er t$e entire financial reporting process. /$at sstems does t$is include ANS: T$is includes t$e financial reporting sstem0 t$e general ledger sstem0 and t$e transaction processing sstems t$at suppl t$e data for financial reporting. PTS: 1 1,. /$ is it it necessar necessar to distingu distinguis$ is$ bet&een bet&een AIS and *IS *IS ANS: >ecause of t$e $ig$l integrati!e nature of modern information sstems0 management and auditors need a conceptual !ie& of t$e information sstem t$at distinguis$es #e processes and areas of ris# and legal responsibilit responsibilit from t$e ot$er 5non-legall binding6 aspects of t$e sstem. /it$out suc$ a model0 critical management and audit responsibilities under S9; ma not be met. PTS: 1 1. o& $as S9; legislation legislation impacted t$e t$e consulting consulting practices practices of public accounting accounting firms firms full le at hp://testbankeasy.com
full le at hp://testbankeasy.com ANS: Prior to S9;0 a gra area of o!erlap e(isted bet&een assurance and consulting ser!ices. Auditors &ere once allo&ed to pro!ide consulting ser!ices to t$eir audit clients. T$is is no& pro$ibited from doing so under S9; legislation. PTS: 1 1. 1. /$at /$at is disc discret retion ionar ar repo reporti rting ng ANS: +eports used b management t$at t$e compan is not obligated b la&0 la&0 regulation0 or contract to pro!ide. T$ese are often used for internal problem-sol!ing issues rat$er t$an b e(ternal constituents. PTS: 1 2. Name t$e fi!e c$aracteri c$aracteristics stics of infor informatio mation n ANS: +ele!ance0 accurac0 completeness0 summariation0 and timeliness. PTS: 1 ESSA' 1. 4ontrast 4ontrast t$e responsibi responsibilitie litiess of operatio operations ns management0 management0 middle middle management0 management0 and top management. management. <(plain t$e different information needs for eac$ le!el of management. ANS: 9perations management is directl responsible for controlling da-to-da operations. 9perations managers reEuire detailed information on indi!idual transactions suc$ as sales0 s$ipment of goods0 usage of labor and materials in t$e production process0 and internal transfers of resources from one department to anot$er. >udgeting information and instructions flo& do&n&ard from top and middle management to operations management.
*iddle managers perform s$ort-term planning and coordination of acti!ities necessar to accomplis$ organiational organiational ob7ecti!es. *iddle management reEuires information t$at is more summaried and oriented to&ard reporting on o!erall performance and problems0 rat$er t$an routine operations. Top management is responsible for longer-term planning and setting organiational ob7ecti!es. Information pro!ided to top management is $ig$l summaried. PTS: 1 2. <(plain <(plain t$e t$e differen difference ce bet&een bet&een data data and and informati information. on. ANS: =ata are facts &$ic$ ma or ma not be processed@ data $a!e no particular impact on t$e user. Information is processed data t$at causes t$e user to ta#e action. PTS: 1 3. /$ do auditors auditors need to underst understand and t$e organi organiatio ational nal structure structure of t$e busines business s ANS: T$e structure of an organiation reflects t$e distribution of responsibilit0 responsibilit0 aut$orit0 and accountabilit t$roug$out t$e organiation. Auditors need to #no& $o& t$e organiation functions to properl audit it. PTS: 1 ". Se!eral Se!eral ad!antages ad!antages of cloud cloud computing computing $a!e $a!e been discuss discussed. ed. =iscuss =iscuss at least t$ree. t$ree. ANS: T$e ad!antages of cloud computing include access to &$ate!er computing po&er it needs0 paing onl for &$at is used0 and fle(ible and relati!el s$ort term computing contracts. PTS: 1 &. Came an! an! e*plain e*plain the purpos purpose e of the three three ma$or subsy subsystem stemss of the )-: )-: full le at hp://testbankeasy.com
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)C:
TPS
records t$e financial transactions of t$e firm
'?F+S
produces t$e financial statements etc. reEuired b la&
*+S
pro!ides information to internal management for decision ma#ing
PTS: 1 ). /$at are t$e t$e t$ree primar primar functions functions performe performed d b t$e transactio transaction n processing processing sstem sstem ANS: con!erting economic e!ents into financial transaction0 recording financial transaction in t$e accounting records 57ournals and ledgers60 and distributing essential essential financial information to operations personnel to support dail operations. PTS: 1 ,. /$at factors factors moti!at moti!atee managemen managementt to outsourc outsourcee IT ANS: *anagement ma be moti!ated to outsource It because t$e IT segment segment of an organiation comprises $ig$l tec$nical0dnamicall tec$nical0dnamicall c$anging0 and e(pensi!e acti!ities. T$e administrati!e burden and $ig$ costs associated &it$ managing and maintaining IT functions are also moti!ation. PTS: 1 . =escribe =escribe t$e problem problem of data data redundanc redundanc.. ANS: Information sstems $a!e limited collection0 processing0 and data storage capacit. capacit. =ata redundanc o!erloads facilities and reduces t$e o!erall efficienc of t$e sstem. Inconsistenc among redundant data elements can result in inappropriate actions and bad decisions. PTS: 1 . 4ompare 4ompare and contras contrastt IT outsou outsourcing rcing and and cloud cloud computing computing.. ANS: IT outsourcing in!ol!ed an organiation selling its IT resources 5$ard&are0 soft&are0 and facilities6 to a t$ird-part outsourcing outsourcing !endor and t$en leasing bac# IT ser!ices from t$e !endor for a contract period of tpicall bet&een fi!e and ten ears. A !ariant !ariant of IT outsourcing0 called cloud computing0 is locationindependent computing &$ereb s$ared data centers deli!er $osted IT ser!ices o!er t$e Internet. An organiation pursuing cloud computing signs a contract &it$ an IT ser!ice pro!ider to pro!ide computing resources. /$en demand e(ceeds t$e pro!ider8s IT capacit0 capacit0 it acEuires additional capacit from data centers in t$e GcloudH t$at are connected !ia t$e Internet. T$e ad!antage to t$e client organiation is access to &$ate!er computing po&er it needs0 &$ile it pas onl for &$at it uses. Also0 cloud computing contracts are fle(ible and relati!el s$ort term. In contrast0 traditional outsourcing contracts tend to be fi(ed price0 infle(ible0 and muc$ longer term. PTS: 1 1. =istinguis$ bet&een t$e t$e accounting accounting information information sstem sstem and t$e management management information information sstem. sstem. ANS:
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full le at hp://testbankeasy.com T$e AIS processes financial 5e.g.0 cas$ receipts6 and nonfinancial 5e.g.0 addition to t$e appro!ed !endor list6 transactions t$at directl affect t$e processing of t$e financial transaction. T$ese are $andled b t$e t$ree ma7or subsstems: transaction processing0 general ledger?financial reporting0 and management reporting. T$e *IS processes additional nonfinancial transactions transactions t$at contribute to t$e decision ma#ing of managers. PTS: 1 11. 11. =escribe =escribe t$e t$e attest attest functio function n and its its ob7ecti ob7ecti!es. !es. ANS: T$e attest function0 or t$e ta#st of an e(ternal audit is an independent attestation performed b an e(pert t$e auditor&$o e(presses e(presses an opinion regarding regarding t$e presentation presentation of financial statements. statements. T$e attest function is performed b 4ertified Public Accountants Accountants 54PA6 54PA6 &$o &or# for public accounting firms t$at are independent of t$e client organiation being audited. T$e audit ob7ecti!e is al&as associated &it$ assuring t$e fair presentation of financial statements. T$ese audits are0 t$erefore0 often referred to as financial audits. T$e Securities and <(c$ange 4ommission 5S<46 reEuires all publicl traded companies to undergo a financial audit annuall. 4PAs conducting suc$ audits represent t$e interests of outsiders: stoc#$olders0 creditors0 go!ernment agencies0 and t$e general public. PTS: 1 12. /$ is it important important to organiationall organiationall separate t$e accounting function function from ot$er functions functions of t$e organiation ANS: T$e accounting function pro!ides record-#eeping ser!ices for all of t$e operations and da-to-da acti!ities of ot$er departments0 &$ic$ affect t$e financial position of t$e organiation. organiation. +ecord #eeping tas#s must be #ept separate from an area t$at $as custod o!er assets. T$us0 t$e accounting function must remain independent so t$at t$e protection of t$e firm8s assets is carried out in an en!ironment &it$ minimum possibilities for t$eft. PTS: 1 13. o& does does S9; affect affect t$e pro!is pro!ision ion of attest attest and ad!iso ad!isor r ser!ices ser!ices
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full le at hp://testbankeasy.com ANS: Prior to t$e passage of S9;0 accounting firms could pro!ide ad!isor ser!ices concurrentl to audit 5attest function6 clients. S9; legislation0 $o&e!er0 greatl restricts t$e tpes of non-audit ser!ices t$at auditors ma render audit clients. It is no& unla&ful for a registered public accounting firm t$at is currentl pro!iding attest ser!ices for a client to pro!ide t$e follo&ing ser!ices: boo##eeping or ot$er ser!ices related to t$e accounting records or financial statements of t$e audit client0 financial information sstems design and implementation0 appraisal or !aluation ser!ices0 fairness opinions0 or contribution-in#ind reports0 actuarial ser!ices0 internal audit outsourcing ser!ices0 management functions or $uman resources0 bro#er or dealer0 dealer0 in!estment ad!iser0 or in!estment ban#ing ser!ices0 legal ser!ices and e(pert ser!ices unrelated to t$e audit0 or an ot$er ser!ice t$at t$e >oard determines0 b regulation0 is impermissible. PTS: 1 1". /$at are t$e similarities similarities and differences differences bet&een bet&een e(ternal auditors and internal internal auditors auditors ANS: T$e c$aracteristic t$at conceptuall distinguis$es e(ternal auditors from internal auditors is t$eir respecti!e constituencies: &$ile e(ternal auditors represent outsiders0 internal auditors represent t$e interests of t$e organiation. Ne!ert$eless0 in t$is capacit0 internal auditors often cooperate &it$ and assist e(ternal auditors in performing aspects of financial audits. T$is cooperation is done to ac$ie!e audit efficienc and reduce audit fees. For e(ample0 a team of internal auditors can perform tests of computer controls under t$e super!ision of a single e(ternal auditor. auditor. T$e independence and competence of t$e internal audit staff determine t$e e(tent to &$ic$ e(ternal auditors ma cooperate &it$ and rel on &or# performed b internal auditors. auditors. <(ternal auditors auditors can rel in part on e!idence e!idence gat$ered b internal internal audit departments t$at are organiationall organiationall independent and report to t$e board of directors8 audit audit committee. A trul independent internal audit staff adds !alue to t$e e(ternal audit process. PTS: 1
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full le at hp://testbankeasy.com 1%. /$at are are fraud fraud audits audits and and &$ $a!e t$e t$e become become more more common common ANS: T$e ob7ecti!e of a fraud audit is to in!estigate anomalies and gat$er e!idence of fraud t$at ma lead to criminal con!iction. Sometimes fraud audits are initiated &$en corporate management suspects emploee fraud. Alternati!el Alternati!el00 boards of directors ma $ire fraud auditors to in!estigate t$eir o&n e(ecuti!es if t$eft of assets or financial fraud is suspected. 9rganiations !ictimied b fraud usuall contract &it$ specialied fraud units of public accounting firms or &it$ companies t$at specialie in forensic accounting. In recent ears fraud audits $a!e increased in popularit as a corporate go!ernance tool. T$e $a!e been t$rust into prominence b a corporate en!ironment in &$ic$ bot$ emploee t$eft of assets and ma7or financial frauds b management 5e.g.0
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