Chapter 1: The Information System

Question 1

Accounting Information System

Answer 1

Is a system of collecting, storing, and processing financial and accounting data that are used by decision makers

Question 2

Information Objectives

Answer 2

To support the firm’s day to day operations, to support management decision making, to support the stewardship function of management

Question 3

Information System

Answer 3

Is the set of formal procedures by which data is collected, stored, processed into information, and distributed to users

Question 4

Management Information System

Answer 4

a computerized information-processing system designed to support the activities of company or organizational management.

Question 5

Transaction

Answer 5

Is an event that affects or is of interest to the organization and is processed by its information system as a unit of work

Question 6

Financial Transaction

Answer 6

Is an economic event that affects the assets and equities of the organization and is measured in monetary terms

Question 7

Nonfinancial Transactions

Answer 7

Are events that do not meet the narrow definition of a financial transaction

Question 8

The 3 parts of the Accounting Information System

Answer 8

The transaction processing system, general ledger/financial reporting system, and management reporting system

Question 9

Transaction Processing System

Answer 9

Supports daily business operations with numerous reports, documents, and messages for users throughout the organization

Question 10

General Ledger/Financial Reporting System

Answer 10

Produces the traditional financial statements such as the income statement, balance sheet, statement of cash flows, tax returns, and other reports

Question 11

Management Reporting System

Answer 11

Provides internal management with special purpose financial reports and information needed for decision making such as budgets, variance reports, and responsibility reports

Question 12

Non discretionary Reporting

Answer 12

The organization has few or no choices in the information it provides

Question 13

Discretionary Reporting

Answer 13

The organization can choose what information to report and how to present it

Question 14

External Users

Answer 14

Creditors, stockholders, and customers among others

Question 15

Internal Users

Answer 15

Include management at all levels of the organization

Question 16

Data

Answer 16

Are facts which may or may not be processed and have no direct effect on a user’s actions

Question 17

Information

Answer 17

Causes the user to take an action that he or she otherwise could not or would not have taken

Question 18

Data Sources

Answer 18

Are financial transactions that enter the information system from either internal or external sources

Question 19

Data Collection

Answer 19

Is the first operational stage in the information system. The objective is to ensure that event data entering the system are valid, complete, and free from errors

Question 20

Data Processing

Answer 20

Once data is collected it usually requires processing to produce information.

Question 21

Examples of Data Processing

Answer 21

Mathematical algorithms used for producing scheduling applications, statistical techniques for forecasting, and posting procedures used for accounting applications

Question 22

Database

Answer 22

Is its physical repository for financial and non financial data. Regardless of the databases physical form business data is organized in a logical hierarchy

Question 23

Database Management

Answer 23

Involves three fundamental tasks: storage, retrieval, and deletion.

Question 24

Storage Task

Answer 24

Assigns keys to new records and stores them in their proper location in the database

Question 25

Retrieval

Answer 25

Is the task of locating and extracting an existing record from the database for processing

Question 26

Deletion

Answer 26

Is the task of permanently removing obsolete or redundant records from the database

Question 27

Information Generation

Answer 27

Is the process of compiling, arranging, formatting, and presenting information to users

Question 28

Feedback

Answer 28

Is a form of output that is sent back to the system as a source of data

Question 29

Materials Management

Answer 29

The three sub functions of materials management are purchasing, receiving, and stores

Question 30

Materials Management: Purchasing

Answer 30

Is responsible for ordering inventory from vendors when inventory levels fall to their reorder points

Question 31

Materials Management: Receiving

Answer 31

Is the task of accepting the inventory previously ordered by purchasing.

Question 32

Materials Management: Stores

Answer 32

Takes physical custody of the inventory received and releases these resources into the production process as needed

Question 33

Production Planning

Answer 33

Involves scheduling the flow of materials, labor, and machinery to efficiently meet production needs

Question 34

Quality Control

Answer 34

Monitors the manufacturing process at various points to ensure that the finished products meet the firms quality standards

Question 35

Maintenance

Answer 35

Keeps the firms machinery and other manufacturing facilities in running order.

Question 36

Central Data Processing

Answer 36

All data processing is performed by one or more large computers housed in a common data center that serves users throughout the organization

Question 37

Distributed Data Processing

Answer 37

Users process their transactions locally. Each user segment possesses the IT personnel, facilities, hardware, software, and data they need to support their operations

Question 38

Commercial Software

Answer 38

Is available for both general accounting use and for industry specific such as medical billing

Question 39

Enterprise Resource Planning

Answer 39

Is comprised of thousands of small program modules. The IT team select modules that support the organization’s specific information and data processing needs

Question 40

Network

Answer 40

Is a collection of interconnected computers and communication devices that allows users to communicate, access data, and share information

Question 41

Network Administration

Answer 41

Is responsible for the effective functioning of the software and hardware that constitute the organization’s network

Question 42

IT Outsourcing

Answer 42

The organization sells its IT resources to a third party outsourcing vendor

Question 43

Cloud Computing

Answer 43

Is a location independent computing where shared data centers deliver hosted IT services over the Internet

Question 44

Domain Experts

Answer 44

This involves specifying certain operational rules, reporting requirements, and framing internal control objectives the system must achieve

Question 45

Conceptual System

Answer 45

Involves specifying the criteria for identifying delinquent customers and the information that needs to be reported

Question 46

Physical System

Answer 46

Includes the data storage medium to be used and the method for capturing and presenting the information

Question 47

Attest Function

Answer 47

Is performed by CPAs who work for public accounting firms that are independent of the client organization being audited

Question 48

Internal Auditing

Answer 48

Is an independent appraisal function established within an organization to examine and evaluate its activities