CH6 QB Introduction to financial information Flashcards
Moreton plc produces monthly variance reports for all its production managers. These
show the extent and cause of all variances from the company’s production plans. The
reports enable managers to take corrective action during the following month. In terms of
financial information, these reports can be classified as:
A planning information
B operational information
C tactical information
D strategic information
C Tactical information (C) helps staff deal with short-term issues and opportunities. Planning information specifically helps staff involved in the planning process (A). Operational information (B) is concerned with day-to-day issues. Strategic information (D) has longer-term concerns than both tactical and operational information.
The area outside an information systems boundary is known as the: A location B setting C context D environment
D Systems sit within an environmental setting (D).
The directors of Royguard plc have recently decided to establish an extensive management
information system within one of its subsidiaries. In arriving at this decision, the directors
were likely to have been conscious that the subsidiary’s operations were largely
characterised by:
A structured decisions
B unstructured decisions
C non-programmable decisions
D non-routine decisions
A Structured decisions can be reduced to a series of rules which, if followed, will lead to
the correct decision being made. This is what management information systems
specialise in.
The information systems manager of Detrex plc wants all data input into the company’s
databases to be complete and accurate. As part of his information management role, he
makes use of range checks. The use of range checks should help to deliver:
A completeness only
B accuracy only
C both accuracy and completeness
D neither accuracy nor completeness
B A range check can give some assurance that a value is accurate (for example, months
in a date should be from 1 to 12). A range check can give no assurance that all
transactions have been accounted for.
The manager of Hettie plc’s information systems wants all data input into the company’s
databases to be accurate and complete. As part of her information management role, she
makes use of control totals. The use of control totals should help to deliver:
A accuracy only
B completeness only
C both accuracy and completeness
D neither accuracy nor completeness
C A pre-established control total will reconcile if data is subsequently entered
inaccurately or not all data is entered. The control total, therefore, addresses both
completeness and accuracy.
Ranger plc’s information systems manager wants all data on the company’s databases to be
the same as their sources and not to have been accidentally or deliberately altered,
destroyed or disclosed. His concern, therefore, is with:
A data accuracy
B data integrity
C data authenticity
D data completeness
B The manager’s comments are a definition of the ACIANA quality of data integrity. It is
achieved by preventing accidental or deliberate but unauthorised insertion,
modification or destruction of data in the database
Zing plc’s information system automatically maintains a log of user activity. This log contains
details of identity, log-on and log-off times and details of processing carried out and access
attempts made. All transactions are tagged to identify the person responsible for that
processing. The log-on details of the user determine processing access.
Which three of the following control objectives does this system effectively address?
A Prevention
B Detection
C Deterrence
D Correction
E Accuracy
F Completeness
A, B, C
The log should help to prevent (A) unauthorised processing as processing privileges
are defined by the log-in details. Because any transaction can be traced to the
perpetrator, the log will aid detection (B) and deterrence (C). The log can do little
about correction, completeness or accuracy of what the user enters.
Which of the following statements concerning management information systems and
transaction processing systems is correct?
A A management information system is likely to be the foundation of a transaction
processing system.
B Management information systems and transaction processing systems are usually
independent.
C Management information systems and transaction processing systems are synonymous.
D A transaction processing system is likely to be the foundation of a management
information system.
D A management information system concentrates on producing useful reports from
internal data. Much of the internal data will arise from transactions that have been
recorded by the transaction processing system.
Which of the following characteristics relates to strategic information as opposed to operational information? A Often based on estimates B Often very detailed C Mostly very accurate D Usually routine
A Strategic information is used by an organisation’s senior managers to plan its longterm future. Therefore, much use is made of estimates (A) about future sales, costs etc.
Because strategic planning is undertaken at a level removed from day-to-operations
the information is not likely to be very detailed (B). Characteristics C and D are
associated with operational information.
Which three of the following are essential qualities of good information? A Detailed B Immediate C Accurate D Profuse E User-targeted F Complete
C,E,F
This is based on the ACCURATE model of good information. Information does not
need to be detailed (A); in fact, too much detail could detract from it by undermining
its ease of use. Nor does it have to be immediate (B) – it only needs to be available
when it is required (timely). Profuse (D) implies lots of information and this can obscure
the important information which could undermine both relevance and ease of use.
A company correctly records and analyses all its sales transactions. At the end of each
month, a report is produced for the sales director listing details of every sales transaction:
customer, products, quantities and prices. Which of the following describes the quality of
the report’s data and information?
A Good quality of data, but poor quality of information
B Good quality of both data and information
C Poor quality of data, but good quality of information
D Poor quality of both data and information
A The data is both accurate and complete, so as data it must be classed as good data.
However, the report is completely inappropriate for the sales director – too much
detail, no aggregation, not particularly relevant – so it fails the ACCURATE
requirements of being easy to use, user-targeted, relevant or cost-beneficial.
An information system that fails to collect information from its environment will be ignoring information about which three of the following? A Its transactions B Its budgets C Competitor action D Legislation E Its share price F Its mission
C,D,E
All external information will be missed or ignored by this closed system. Therefore,
there will be no information about competitors, legislation or share price.
Royston is the Information Systems Manager of Alnwick plc. He is constructing a system for
use by the company which includes both a ‘knowledge base’ and an ‘inference engine’.
What is Royston constructing?
A A transaction processing system
B A management information system
C An expert system
D A relational database
C These terms are part of an expert system. The knowledge base contains the expert’s
set of decision-making rules and the inference engine applies the rules to the given
circumstances.
Arkwright Ltd analyses huge quantities of data about a wide variety of issues from a wide
variety of sources. Arkwright Ltd is seeking competitive advantage from:
A its transaction processing system
B big data
C cybersecurity
D its strategic planning process
B A company which uses big data for competitive advantage streams in huge quantities
from a variety of internal and external sources, and applies data analytics to obtain as
much value from the data as possible.
The depreciation policies adopted by Plumtree Ltd have not changed for the past five
years. According to the IASB’s Conceptual Framework for Financial Reporting, this supports
the qualitative characteristic for its financial information of:
A understandability
B relevance
C timeliness
D comparability
D Comparability from one year to the next is helped by companies choosing a particular
accounting policy and remaining with it.
The IASB’s Conceptual Framework for Financial Reporting states that financial information is
useful when it both influences the decisions of users of the information and:
A is produced in a timely fashion
B is complete and accurate
C establishes management accountability
D is produced in a cost-beneficial way
C In addition to helping users make decisions, the IASB’s Conceptual Framework for
Financial Reporting states that financial information, in general, is useful when it shows
the results of management’s stewardship of the resources entrusted to it, so that
managers are thereby accountable to shareholders.
As a result of reading the financial statements of Tatra plc, Michaela decided to increase her
shareholding in the company. In terms of the IASB’s Conceptual Framework for Financial
Reporting, this confirms that the information in Tatra plc’s financial statements was:
A positive
B timely
C material
D relevant
D When financial information influences the decisions of users it is said to be relevant.
Changes to Merrick Ltd’s transaction processing system can only be made by people who
are accountable for the changes. This contributes towards which one of the essential
qualities of a secure information system?
A Confidentiality
B Integrity
C Non-repudiation
D Authorisation
D Authorisation, in this context, is the fact that changes can only be made by accountable
individuals. It is one of the ACIANA qualities of a secure system.
Each month the Business School at Newtown University receives financial performance data
for the previous month. Each month the senior managers of the Business School complain
that they cannot rely on this information as it contains errors. The information, therefore, is
often ignored by managers. In terms of the qualities of a secure information system, the
actions of the managers show that the system lacks the quality of:
A confidentiality
B availability
C non-repudiation
D authorisation
C Non-repudiation refers to the fact that information should not be open to being
rejected by its recipients on the grounds of faults in the information system. It is one of
the ACIANA qualities of a secure system.
The chief executive of Table plc is not convinced about the usefulness of much of the
information in the company’s financial statements. He makes three statements about the
specific characteristics of the information that he believes may undermine its usefulness.
Statement (1) It lacks timeliness
Statement (2) A high level of regulation applies to it
Statement (3) It contains a high level of aggregation
Which of these statements identify characteristics that are likely to undermine the
information’s usefulness?
A Statements (1) and (2) only
B Statements (2) and (3) only
C Statements (1) and (3) only
D Statements (1), (2) and (3)
C Its lack of timeliness undermines usefulness.
The high level of regulation does not undermine usefulness.
The high level of aggregation it contains undermines usefulness.
By definition financial statements are produced some months after a company’s
financial year end so the information they contain is not timely; lack of timeliness
undermines relevance, even though figures may thereby be a more faithful
representation. The level of aggregation in the figures can obscure important details
and so undermine usefulness. The level of regulation, however, adds to faithful
representation and comparability, both of which add to rather than detract from their
usefulness.
Which of the following issues are key in relation to information processing in a company's accounting systems? Issue 1 Completeness Issue 2 Non-repudiation Issue 3 Verifiability A Issues 1 and 2 only B Issues 2 and 3 only C Issues 1 and 3 only D Issues 1, 2 and 3
C To be effective, information processing should meet the CATIVA criteria –
completeness, accuracy, timeliness, inalterability, verifiability and assessability. Nonrepudiation is one of the ACIANA qualities of information systems security
In relation to users of financial information, which of the following statements is true?
A External users evaluate the performance of a company’s management using
management accounting.
B Financial reporting provides information to managers and people outside the
company, such as investors.
C Management accounting provides information to managers and people outside the
company, such as investors.
D Financial reporting generates confidential information for internal decision makers
such as executives and management.
B External users do not have access to management accounting information (A) and (C).
Financial reporting does provide information to both managers and people outside
the company, such as investors (B) but it is not confidential (D).
The IASB’s Conceptual Framework for Financial Reporting states that, to support the
effective working of capital markets for the benefit of businesses, financial statements must
have which two fundamental qualitative characteristics?
A Understandability
B Relevance
C Faithfulness of representation
D Comparability
E Timeliness
F Verifiability
B,C These are the fundamental qualitative characteristics. The enhancing qualitative
characteristics are understandability, comparability, verifiability and timeliness. If
financial statements demonstrate at least the fundamental characteristics then investors
will be able to rely on them in making their decisions; this reliance is enhanced if the
further characteristics are also displayed.
Russell is an accountant working for Forsell plc. He has made the following points
concerning financial statements. Which of Russell’s points is true?
A Financial statements are used mainly by management
B Financial statements are used by parties internal to the business only
C Financial statements are used only by investors
D Financial statements are used by investors, payables (creditors) and management
D General purpose financial statements are used by investors, payables (creditors) and
management.
