Ch.7 52) Which attribute below is not an aspect of the COSO ERM Framework internal environment?

A) Enforcing a written code of conduct B) Holding employees accountable for achieving objectives C) Restricting access to assets D) Avoiding unrealistic expectations 2) Which of the following is not one of the risk responses identified in the COSO Enterprise Risk Management Framework? A) Monitoring B) Avoidance C) Acceptance D) Sharing 7) Independent checks on performance include all the following except A) data input validation checks. B) reconciling hash totals. C) preparing a trial balance report. D) supervisor review of journal entries and supporting documentation. 20) Which of the following statements about internal environment is false? A) Management's attitudes toward internal control and ethical behavior have only minimal impact on employee beliefs or actions. B) Supervision is especially important in organizations that cannot afford elaborate responsibility reporting or are too small to have adequate segregation of duties. C) An overly complex or unclear organizational structure may be indicative of more serious problems. D) A written policy and procedures manual is an important tool for assigning authority and responsibility. 27) Which of the following is accomplished by corrective controls? A) Identify the cause of the problem. B) Correct the resulting errors. C) Modify the system to prevent future occurrences of the problem. D) All of the above are accomplished by corrective controls. 28) Duplicate checking of calculations is an example of a ________ control, and procedures to resubmit rejected transactions is an example of a ________ control. A) corrective; detective B) detective; corrective C) preventive; corrective D) detective; preventive 40) The COSO Enterprise Risk Management Framework includes eight components. Which of the following is not one of them? A) control environment B) risk assessment C) compliance with federal, state, or local laws D) monitoring Ch6 5) The unauthorized copying of company data is known as A) data leakage. B) eavesdropping.

C) masquerading. D) phishing. 8) Gaining control of someone else's computer to carry out illicit activities without the owner's knowledge is known as A) hacking. B) hijacking. C) phreaking. D) sniffings. 19) The unauthorized use of special system programs to bypass regular system controls and perform illegal act is called A) a Trojan horse. B) a trap door. C) the salami technique. D) superzapping. Ch5 3) Which of the following is the greatest risk to information systems and causes the greatest dollar losses? A) human errors and omissions B) physical threats such as natural disasters C) dishonest employees D) fraud and embezzlement 4) All of the following could lead to computer fraud except A) allowing computer operators full access to the computer room. B) releasing data to unauthorized users. C) allowing computer users to test software upgrades. D) storing backup tapes in a location where they can be quickly accessed. 7) Most frauds are detected by A) external auditors. B) internal auditors. C) accident. D) hotline tip. 10) "Cooking the books" is typically accomplished by all the following except A) inflating accounts payable. B) accelerating recognition of revenue. C) delaying recording of expenses. D) overstating inventory. 13) Intentional or reckless conduct that results in materially misleading financial statements is called A) financial fraud. B) misstatement fraud. C) fraudulent financial reporting. D) audit failure fraud. 18) In many cases of fraud, the ________ takes more time and effort than the ________. A) concealment; theft B) theft; concealment C) conversion; theft

D) conversion; concealment 20) In a ________ scheme, customer receipts are stolen and then subsequent payments by other customers are misapplied to cover the theft of the original receipts. A) kiting B) laundering C) bogus expense D) lapping 22) Which characteristic of the fraud triangle often stems from a lack of internal controls within an organization? A) pressure B) opportunity C) rationalization D) concealment 24) What is the most prevalent opportunity within most companies to commit fraud? A) lack of any internal controls B) failure to enforce the internal controls C) loopholes in the design of internal controls D) management's failure to believe employees would commit fraud 25) Which characteristic of the fraud triangle relates to excuses that perpetrators use to justify their illegal behavior? A) pressure B) opportunity C) rationalization D) concealment 33) Downloading a master list of customers and selling it to a competitor is an example of A) data fraud. B) output theft. C) download fraud. D) fraudulent financial reporting. Ch3 9) The Sarbanes-Oxley Act requires independent auditors to A) create flowcharts using specialized software. B) establish and maintain adequate controls in the client's information system. C) understand a client's system of internal controls. D) prepare and understand all types of system documentation. 16) In a data flow diagram of the customer payment process, "update receivables" will appear above or in A) a square. B) a circle. C) two horizontal lines. D) none of the above 20) More than one arrow is needed between symbols on a DFD if A) data elements always flow together. B) data elements flow at different times. C) data elements flow to different locations.

D) there is no guideline on use of single or multiple arrows. 22) In a payroll processing DFD, the "prepare reports" activity will be represented by ________, the "employee payroll file" will be represented by ________, and the "management" will be represented by ________. A) a circle; two horizontal lines; a square B) a circle; two horizontal lines; two horizontal lines C) a rectangle; a square; a circle D) a square; two horizontal lines; a circle 27) Which symbol would be used in a flowchart to represent an invoice sent to a customer? A) #2 B) #6 C) #1 D) #15 26) Which symbol would be used in a flowchart to represent a decision? A) #10 B) #16 C) #9 D) #6 28) Which symbol would be used in a flowchart to represent a general ledger? A) #2 B) #1 C) #3 D) #5 31) Which symbol would be used in a flowchart to represent a connection to another part of the flowchart on a different page? A) #4 B) #13 C) #14 D) #15 Ch2 3) Which of the following is not true about the accounts receivable subsidiary ledger? A) Debits and credits in the subsidiary ledger must always equal. B) Every credit sale is entered individually into the subsidiary ledger. C) The total of the subsidiary ledgers must equal the control account. D) The subsidiary ledgers play an important role in maintaining the accuracy of the data stored in the AIS. 14) Common source documents for the revenue cycle include all of the following except A) sales order. B) receiving report. C) delivery ticket. D) credit memo. 18) Pre-numbering of source documents helps to verify that A) all transactions have been recorded since the numerical sequence serves as a control. B) source data automation was used to capture data. C) documents have been used in order. D) company policies were followed.

20) When the sum of all entries in the subsidiary ledger equals the balance in the corresponding general ledger account, it is assumed that A) the recording processes were accurate. B) all source documents were recorded. C) adjusting entries are not required. D) no errors exist in the subsidiary ledger. 43) The quality assurance department at a large manufacturing business enters data into the AIS that is used to produce a weekly report that summarizes the proportion of defective units in each product line. This is an example of A) internal financial information. B) internal nonfinancial information. C) external financial information. D) external nonfinancial information. 51) The coding technique most likely used for sales orders is called a A) group code. B) block code. C) data code. D) sequence code. 62) Which of the following statements about data processing methods is true? A) Online real-time processing does not store data in a temporary file. B) Batch processing cannot be used to update a master file. C) Control totals are used to verify accurate processing in both batch and online batch processing. D) Online real-time processing is only possible with source data automation. 65) Implementation of an ERP system requires increased focus on all except which of the following controls ? A) Segregation of duties between custody, authorization, and recording B) Data entry controls on validity and accuracy C) Controls over access to data D) Appropriate disposal of hard copy reports 66) Which statement below regarding the AIS and managerial reports is false? A) The AIS is best utilized for financial data while the management information system is best utilized for operational data. B) The AIS must be able to provide managers with detailed operational information about the organization's performance. C) Both financial and nonfinancial data are required for proper and complete evaluation of organizational performance. D) Most source documents capture both financial and nonfinancial data about business transactions. Ch1 19) The value chain concept is composed of two types of activities known as A) primary and support. B) primary and secondary. C) support and value. D) technology and support. 24) An example of inbound logistics would consist of A) the activities that transform inputs into final products or services. B) the activities that help customers to buy the organization's products or services.

C) the activities that provide post-sale support to customers. D) the activities that consist of receiving, storing, and distributing the materials used as inputs by the organization to create goods and/or services it sells. 26) One activity within the value chain is research and development. This activity can be identified as a A) firm infrastructure activity. B) human resources activity. C) technology activity. D) purchasing activity. 31) Inventory information is provided in real time by a firm's accounting information system. The accuracy of this information is questionable, however, since the production manager often reports stock outs of components that the system indicates are in stock. Which of the following characteristics of useful information is absent in the situation described above? A) Relevant B) Reliable C) Complete D) Timely E) Understandable 44) Many modern accounting software packages offer separate transaction cycle modules. What is the reason for this? A) Every organization does not need to implement all of the available transaction cycle modules. B) Most businesses do not need the revenue cycle module as part of their AIS. C) The nature of a given transaction cycle is the same irrespective of the type of organization. D) A properly designed AIS does not use the concept of separate business transaction cycles to process transactions. 49) Transaction cycles can be summarized on a high level as "give-get" transactions. An example of "give-get" in the revenue cycle would be (RGC) A) give cash, get goods. B) give goods, get cash. C) give cash, get labor. D) give cash, get cash. 54) Which of the following is not an example of how an AIS adds value to an organization? A) All employees at a hospital can access and update patient records from any computer terminal in the hospital. B) A customer service representative can find a customer's account data, purchase history, payment history, and salesperson's name while on the phone with the customer, to resolve issues quickly. C) Suppliers are able to access sales data directly from the point-of-sale system of a retailer and deliver inventory automatically when needed. D) Client tax files are encrypted and made available on the CPA firm's network to any employee with an access code. Ch11 12) Control risk is defined as the A) susceptibility to material risk in the absence of controls. B) risk that a material misstatement will get through the internal control structure and into the financial statements. C) risk that auditors and their audit procedures will not detect a material error or misstatement. D) risk auditors will not be given the appropriate documents and records by management who wants to control

audit activities and procedures. 19) An auditor must be willing to accept some degree of risk that the audit conclusion is incorrect. Accordingly, the auditor's objective is to seek ________ that no material error exists in the information audited. A) absolute reliability B) reasonable evidence C) reasonable assurance D) reasonable objectivity 32) Strong ________ controls can partially compensate for inadequate ________ controls. A) development; processing B) processing; development C) operational; internal D) internal; operational 36) A type of software that auditors can use to analyze program logic and detect unexecuted program code is A) a mapping program. B) an audit log. C) a scanning routine. D) program tracing. 46) An expansion of a firm's operations to include production in Russia and China will have the effect of A) increasing inherent risk. B) reducing inherent risk. C) increasing control risk. D) reducing control risk. 49) An auditor manually calculates accumulated depreciation on a delivery van and compares her calculation with accounting records. This is an example collecting audit evidence by A) confirmation. B) reperformance. C) vouching. D) analytical review. 48) An auditor examines all documents related to the acquisition, repair history, and disposal of a firm's delivery van. This is an example of collecting audit evidence by A) confirmation. B) reperformance. C) vouching. D) analytical review. Ch12 5) Which of the following documents normally triggers the billing process in the revenue cycle? A) Packing slip received from the shipping department B) Sales order received from the sales department C) Picking ticket received from the sales department D) Journal voucher received from the shipping department 7) Which document should always be included with a merchandise shipment to a customer? A) Packing slip B) Picking ticket C) Remittance advice

D) Sales invoice 12) Which of the decisions below is not ordinarily found as part of the revenue cycle? A) What credit terms should be offered? B) How often should accounts receivable be subjected to audit? C) How can customer payments be processed to maximize cash flows? D) What are the optimal prices for each product or service? 18) When a customer places an order (on account) for a certain product, what should be done before the order is checked for inventory availability? A) The customer's available credit should be checked. B) The sales order should be created and written to a file. C) Shipping should be notified of an order in process. D) A picking list should be generated for the warehouse. 24) This document is a legal contract that defines responsibility for goods that are in transit. A) packing slip B) bill of lading C) picking list D) back order 33) A document typically encountered in the revenue cycle that is both an output document and a source document is the A) sales invoice. B) customer purchase order. C) sales order. D) packing slip. Ch13 12) What is a key feature of materials requirements planning (MRP)? A) minimize or entirely eliminate carrying and stockout costs B) reduce required inventory levels by scheduling production rather than estimating needs C) determine the optimal reorder point D) determine the optimal order size 32) One objective of accounts payable is to authorize payment only for goods or services actually ordered and received. The best way to process supplier invoices is to use A) electronic funds transfer for small, occasional purchases from suppliers. B) a nonvoucher system. C) EDI for all small, occasional purchases from suppliers. D) a disbursement voucher system. 44) What is the best way to prevent the acceptance of unordered goods? A) Order only from approved vendors. B) Match the packing slip to a purchase order before accepting delivery. C) Enforce an appropriate conflict of interest policy in place. D) Require specific authorization from the purchasing manager before accepting any goods. 50) A surprise count of an imprest petty cash fund should find the total of ________ equal to the amount authorized for the fund. A) cash and credit memos B) cash and vouchers

C) cash D) cash and checks Ch14 4) An MRP inventory system reduces inventory levels by A) reducing the uncertainty about when materials are needed. B) computing exact costs of purchasing and carrying inventory. C) delivering materials to the production floor exactly when needed and in exact quantities. D) none of the above 5) Which of the following is not a product design objective? A) Design a product that meets customer requirements. B) Design a quality product. C) Minimize production costs. D) Make the design easy to track for cost accounting purposes. 7) Push manufacturing is officially known as A) manufacturing resource planning (MRP). B) just-in-time manufacturing system (JIT). C) the economic order quantity (EOQ) system. D) ahead-of-time production implementation (ATPI). Answer: A 8) Pull manufacturing is officially known as A) manufacturing resource planning (MRP). B) just-in-time manufacturing system (JIT). C) the economic order quantity (EOQ) system. D) ahead-of-time production implementation (ATPI). 15) The use of various forms of information technology in the production process is referred to as A) computerized investments and machines. B) computerized integration of machines. C) computer-integrated manufacturing. D) computer intense manufacturing. 20) Detailed data about reasons for warranty and repair costs is considered an applicable control used to mitigate the threat of A) underproduction. B) overproduction. C) poor product design. D) suboptimal investment of fixed assets. 22) Overproduction or underproduction can be a threat to an organization. To which process or activity does this threat relate? A) product design B) planning and scheduling C) production operations D) cost accounting Ch15 9) What is not a desired result of an employee bonus/incentive system? A) Employees may recommend unnecessary services to customers in order to exceed set sales quotas and earn a

bonus. B) Employees may look for ways to improve service. C) Employees may analyze their work environment and find ways to cut costs. D) Employees may work harder and may be more motivated to exceed target goals to earn a bonus. 11) Payroll deductions fall into the broad categories of ________ and ________. A) payroll tax withholdings; voluntary deductions B) unemployment; social security taxes C) unemployment taxes; income taxes D) voluntary deductions; income taxes 29) When using electronic documents, ________ increase the accuracy of data entry. A) access controls B) separation of duties C) general controls D) application controls 33) What is the purpose of a general ledger payroll clearing account? A) to check the accuracy and completeness of payroll recording and its allocation to cost centers B) to make the bank reconciliation easier C) to make sure that all employees are paid correctly each week D) to prevent the cashier from having complete control of the payroll cycle Ch16 1) The general ledger and reporting system consists of the ________ involved in ________ the general ledger and ________ reports. A) business transactions; updating; processing B) data processing; business transactions for; printing C) information processing; updating; creating D) business transactions; data processing; preparing 9) Adjusting entries that reflect events that have already occurred, but for which no cash flow has taken place are classified as A) accruals. B) deferrals. C) revaluations. D) corrections. 12) Depreciation expense and bad debt expense are examples of which type of adjusting journal entry? A) deferrals B) accruals C) revaluations D) estimates 15) Corrections are entries made to correct errors found in ________. A) all journals B) special journals C) the general ledger D) the financial statements 16) Immediately after the adjusting entries are posted, the next step in the general ledger and reporting system is to prepare

A) an adjusted trial balance. B) closing entries. C) financial statements. D) an unadjusted trial balance. 21) The managerial report that shows planned cash inflows and outflows for major investments or acquisitions is the A) journal voucher list. B) statement of cash flows. C) operating budget. D) capital expenditures budget. 28) Variances for variable costs will be misleading when the planned output differs from budgeted output. A solution to this problem would be A) calling all costs fixed. B) to use flexible budgeting. C) better prediction of output. D) to eliminate the budgeting process.