Mock Exan 1

Question 1

Data access security related to applications may be enforced through all of the following except:
a) User identification and authentication functions in access control software.
b) Security functions provided by a database management system.
c) User identification and authentication functions incorporated in the application.
d) Utility software functions.

Answer 1

Utility programs perform routine functions (e.g., sorting and copying), are available to all users, and are promptly available for many different applications. Utility programs are one of the more serious weaknesses in data access security because some can bypass normal access controls.

Question 2

Which must be part of any risk model involving inventory valuation?
a) Product warranty policies.
b) Inventory shrinkage expense.
c) Annual sales forecasts.
d) Vendor pricing policies.

Answer 2

b) The amount of inventory loss through shrinkage directly affects inventory valuation. Inventory shrinkage must be considered in risk models involving inventory valuation.

Question 3

Which of the following statements is(are) true regarding the Internet as a commercially viable network?
1. Organizations must use firewalls if they wish to maintain security over internal data.
2. Companies must apply to the Internet to gain permission to create a home page to engage in electronic commerce.
3. Companies that wish to engage in electronic commerce on the Internet must meet required security standards established by the coalition of Internet providers.

a) 2 only
b) 1 only
c) 3 only
d) 1 and 3 only

Answer 3

a) 2 only

Question 4

During the preliminary survey for an audit of one of an organization’s manufacturing plants, an auditor discovers that the plant experiences production problems with costs far in excess of those budgeted and with finished goods inventory levels that are clearly excessive. Which of the following management control procedures would have best brought the problems to management’s attention earlier?

a) Planning monthly production based on management forecasts, with a report comparing actual production with forecasted production and actual costs with budgeted costs provided to management on a weekly basis.
b) Establishing perpetual inventory control procedures at each plant, with a report detailing any inventory items with levels in excess of two weeks’ production provided to management on a weekly basis.
c) Implementing standard costing procedures at each plant, with a summary of variances reported to management on a weekly basis.
d) Comparing actual sales with forecasted sales and budgeted gross margin with actual gross margin, with a report provided to management on a weekly basis.

Answer 4

a) Comparing actual production with management forecasts detects whether finished goods inventory is excessive, and comparing actual costs with budgeted costs detects unfavorable cost variances.

Question 5

Which of the following is a true statement about Hadoop?
a) It analyzes text data from the web, comment fields, books, and other text-based sources through the use of machine learning or natural language processing technology.
b) It is open source software framework that stores large amounts of data and runs applications on clusters of commodity hardware.
c) It analyzes data from system memory instead of hard drives.
d) It is a technology that uses data, statistical algorithms, and machine-learning techniques to identify the likelihood of future outcomes based on historical data.

Answer 5

b) Hadoop is an open source software framework that stores large amounts of data and runs applications on clusters of commodity hardware.

Question 6

The primary objective of security software is to
a) Monitor the separation of duties within applications.
b) Detect the presence of viruses.
c) Restrict access to prevent installation of unauthorized utility software.
d) Control access to information system resources.

Answer 6

d) The objective of security software is to control access to information system resources, such as program libraries, data files, and proprietary software. Security software identifies and authenticates users, controls access to information, and records and investigates security related events and data.

Question 7

When reviewing the system design of data input controls, which of the following should be given the least consideration?
a) Authorization.
b) Validation.
c) Configuration.
d) Error notification.

Answer 7

c) Data input controls are application controls. The objective of application controls is to ensure the completeness, accuracy, authorization, and validity of input data, processed data, stored data, and output data. Configuration is a consideration when reviewing IT general controls, not application controls. It is a logical access control that ensures only authorized persons and applications have access to data and applications.

Question 8

Advantages of decentralization include all of the following except
a) Greater uniformity in decisions.
b) Decisions are more easily made.
c) Problems can be dealt with on the spot.
d) Managers’ motivation increases.

Answer 8

a) Organizational design should achieve a balance between centralization and decentralization. The main benefits of centralization are more effective control and reduced costs through resource sharing. The main benefits of decentralization are flexibility and adaptability that permit a rapid response to changes in circumstances. Accordingly, increased uniformity in decision making is an advantage of centralization. It reflects the benefit of more effective control.

Question 9

Your objective is to determine that nonrecurring purchases, initiated by various user organizations, have been properly authorized. If all purchases are made through the purchasing department, to which of the following documents should you vouch purchases?
a) Purchase requisitions.
b) Purchase orders.
c) Invoices.
d) Receiving reports.

Answer 9

a) When the auditor tests for unauthorized nonrecurring purchases, (s)he should vouch purchases to the purchase requisitions. The initiating authorization by the user department is embodied in a properly authorized purchase requisition.

Question 10

In general, a firm should drop a product line when
a) The marginal cost of the project exceeds the marginal revenue.
b) The selling price is less than the average cost of production.
c) The marginal revenue of the project exceeds the marginal cost.
d) Unavoidable costs exceed total contribution margin.

Answer 10

a) In general, if the marginal cost of a project exceeds the marginal revenue, a firm should disinvest in that product line.

Question 11

Preventing someone with sufficient technical skill from circumventing security procedures and making changes to production programs is best accomplished by
a) Providing suitable segregation of duties.
b) Reviewing reports of jobs completed.
c) Comparing production programs with independently controlled copies.
d) Running test data periodically.

Answer 11

a) When duties are separated, users cannot obtain a detailed knowledge of programs and computer operators cannot gain unsupervised access to production programs.

Question 12

Which of the following data analytics methods should an auditor use to report on actual results?
a) Descriptive analysis.
b) Text analysis.
c) Diagnostic analysis.
d) Information discovery.

Answer 12

a) Descriptive analysis is the most basic and commonly used data analytics method and concentrates on the reporting of actual results.

Question 13

The punishing of employees is made less effective by
a) Stating the offending behavior specifically.
b) Focusing the discussion on the offending behavior instead of the offender.
c) Permitting employees to challenge individual culpability.
d) Postponing the start of disciplinary procedures.

Answer 13

d) The most effective discipline requires immediate corrective action to eliminate the negative effects of the undesirable employee conduct and to establish and reinforce appropriate behavior. Delay merely invites more serious consequences. Moreover, the punishment should be commensurate with the offense, and the employee should clearly perceive the relationship between the punishment and the behavior.

Question 14

The most difficult aspect of using Internet resources is
a) Getting authorization for access.
b) Making a physical connection.
c) Locating the best information source.
d) Obtaining the equipment required.

Answer 14

c) The most difficult aspect of using Internet resources is locating the best information given the large number of information sources.

Question 15

Which of the following is the best policy for the protection of a company’s vital information resources from computer viruses?
a) Stringent corporate hiring policies for staff working with computerized functions.
b) Physical protection devices in use for hardware, software, and library facilities.
c) Prudent management procedures instituted in conjunction with technological safeguards.
d) Existence of a software program for virus prevention.

Answer 15

c) Acceptably safe computing can be achieved by carefully crafted policies and procedures used in conjunction with antivirus and access control software.

Question 16

For a supply chain to be successful, what is the most important goal for all parties involved?
a) Sustain contact with each other.
b) Establish bonds of trust.
c) Maintain open records.
d) Operate common systems.

Answer 16

b) The sharing of information and coordination among the parties regarding sales, inventory, prices, advertising, and forecasts moderates demand uncertainty for everyone. The parties therefore need to trust each other.

Question 17

Which one of the following provides a spontaneous source of financing for a firm?
a) Accounts payable.
b) Mortgage bonds.
c) Accounts receivable.
d) Debentures.

Answer 17

a) Trade credit is a spontaneous source of financing because it arises automatically as part of a purchase transaction. Because of its ease in use, trade credit is the largest source of short-term financing for many firms, both large and small.

Question 18

A controller became aware that a competitor appeared to have access to the company’s pricing information. The internal auditor determined that the leak of information was occurring during the electronic transmission of data from branch offices to the head office. Which of the following controls would be most effective in preventing the leak of information?
a) Use of fiber-optic transmission lines.
b) Use of passwords.
c) Encryption.
d) Asynchronous transmission.

Answer 18

c) Encryption software uses a fixed algorithm to manipulate plain text and an encryption key (a set of random data bits used as a starting point for application of the algorithm) to introduce variation. Although data may be accessed by tapping into the transmission line, the encryption key is necessary to understand the data being sent.

Question 19

A project coordinator for a large capital project used a brainstorming session of the senior project managers to decide how to get the project back on schedule. A disadvantage of this approach is that
a) Diversity of views will be decreased.
b) Creativity will be decreased.
c) Only situational factors will be addressed.
d) Responsibility for the decision will be unclear.

Answer 19

d) Brainstorming is an aid to creativity in group decision making. This technique requires a group meeting, possibly online, to develop solutions in a criticism-free context. All ideas are recorded and are later either discarded or more fully developed. Thus, a nonjudgmental environment is essential. Moreover, to create such an environment or to avoid having personality conflicts interfere with the process, a means of conferring anonymity on the participants is sometimes used. However, brainstorming suffers from a structural weakness of group decision making, dispersal of accountability.

Question 20

Which of the following would not be appropriate to consider in the physical design of a data center?
a) Use of biometric access systems.
b) Design of authorization tables for operating system access.
c) Inclusion of an uninterruptible power supply system and surge protection.
d) Evaluation of potential risks from railroad lines and highways.

Answer 20

b) Authorization tables for operating system access address logical controls, not physical controls.

Question 21

An organization installed antivirus software on all its personal computers. The software was designed to prevent initial infections, stop replication attempts, detect infections after their occurrence, mark affected system components, and remove viruses from infected components. The major risk in relying on antivirus software is that antivirus software may
a) Interfere with system operations.
b) Make software installation overly complex.
c) Consume too many system resources.
d) Not detect certain viruses.

Answer 21

d) Antivirus software designed to identify and remove known viruses is sometimes known as a vaccine. A vaccine works only for known viruses and may not be effective for variants of those viruses or new viruses.

Question 22

Fact Pattern:
An automobile and personal property insurer has decentralized its information processing to the extent that headquarters has less processing capacity than any of its regional processing centers. These centers are responsible for initiating policies, communicating with policyholders, and adjusting claims. The company uses leased lines from a national telecommunications company. Initially, the company thought there would be little need for interregion communication, but that has not been the case. The company underestimated the number of customers that would move between regions and the number of customers with claims arising from accidents outside their regions. The company has a regional center in an earthquake-prone area and is planning how to continue processing if that center, or any other single center, were unable to perform its processing.
The company has considered several alternatives for replacing the hardware required for a regional center’s processing. An advantage of using a third-party cold site is that
a) The replacement site could be up and running in a few hours.
b) No additional equipment would be required at the regional centers.
c) Personnel employed at the site would be familiar with company operations.
d) Travel expenses would be minimized for company personnel.

Answer 22

b) A cold site backup facility is a shell facility where the user can quickly install computer equipment and resume operations in the event of a disaster. The facility has all of the needed assets in place except the needed computer equipment and is vendor-dependent for timely delivery of equipment. Accordingly, an advantage of using a third-party cold site is the elimination of the need for additional equipment.

Question 23

Which of the following would be a reasonable basis for allocating the material handling costs to the units produced in an activity-based costing system?
a) Number of components per completed unit.
b) Number of production runs per year.
c) Amount of overhead applied to each completed unit.
d) Amount of time required to produce one unit.

Answer 23

a) An essential element of activity-based costing (ABC) is driver analysis, which identifies the cause-and-effect relationship between an activity and its consumption of resources and for an activity and the demands made on it by a cost object. The number of components in a finished product and the amount of materials handling cost incurred have a direct causal relationship.

Question 24

Contingency plans for information systems should include appropriate backup agreements. Which of the following arrangements would be considered too vendor-dependent when vital operations require almost immediate availability of computer resources?
a) A “hot site” arrangement.
b) Using excess capacity at another data center within the organization.
c) A “cold site” arrangement.
d) A “cold and hot site” combination arrangement.

Answer 24

c) Organizations should maintain contingency plans for operations in the case of a disaster. These plans usually include off-site storage of important backup data and an arrangement for the continuation of operations at another location. A cold site has all needed assets in place except the needed computer equipment and is vendor-dependent for timely delivery of equipment.

Question 25

Among the nonfinancial rewards to an employee, a paid vacation trip can best be categorized as
a) Social reward.
b) Visual/auditory reward.
c) Manipulatables.
d) Token award.

Answer 25

d) Token awards are normally nonrecurring. They show appreciation for the role of the employee. Other similar examples are gift coupons, stock options, early time off with pay, or dinner and theater tickets.

Question 26

To avoid invalid data input, a bank added an extra number at the end of each account number and subjected the new number to an algorithm. This technique is known as
a) Field check.
b) Sequence check.
c) Cross-footing.
d) A check digit.

Answer 26

d) Self-checking digits may be used to detect incorrect identification numbers. A check digit is an extra reference number that follows an identification code and bears a mathematical relationship to the other digits. The extra digit is input with the data. The identification code can be subjected to an algorithm and compared to the check digit.

Question 27

Which implemented control would best assist in meeting the control objective that a system have the capability to hold users accountable for functions performed?
a) Programmed cutoff.
b) Activity logging.
c) Redundant hardware.
d) Transaction error logging.

Answer 27

b) Activity logging provides an audit trail of user activity.

Question 28

The use of message encryption software
a) Requires manual distribution of keys.
b) Guarantees the secrecy of data.
c) Reduces the need for periodic password changes.
d) Increases system overhead.

Answer 28

d) Encryption software uses a fixed algorithm to manipulate plain text and an encryption key (a set of random data bits used as a starting point for application of the algorithm) to introduce variation. The machine instructions necessary to encrypt and decrypt data constitute system overhead. As a result, processing speed may be slowed.

Question 29

Which of the following is least likely to be an example of synergy?
a) A manufacturing company hiring a new manager with technological experience lacking in the company.
b) A shopping mall with several businesses providing different products and performing different services.
c) A car dealership providing warranties on automobile parts to maximize customer value.
d) Military Humvees being converted into sports utility vehicles for sale to civilians.

Answer 29

c) Synergy occurs when the combination of formerly separate elements has a greater effect than the sum of their individual effects. However, a car dealership’s provision of warranties reflects an operational strategy designed to provide post-purchase services to gain a competitive advantage and maximize customer value. It does not reflect the complementary sharing of resources, technology, or competencies. In contrast, synergy arises from selling a line of cars that share some components or a brand identification.

Question 30

Which of the following best describes unstructured data?
a) Data systematically stored with markers to enforce hierarchies of records and fields within the data.
b) Data with a high level of organization.
c) Conforms with the organization of data models associated with relational databases.
d) Information that is not organized in a pre-defined manner (e.g., text-heavy facts, dates, numbers, and images).

Answer 30

d) Unstructured data refers to information that is not organized in a pre-defined manner (e.g., text-heavy facts, dates, numbers, and images).

Question 31

When the labor cost accounting component of an integrated end-user computer (EUC) application was first implemented, it did not meet certain business requirements in the department and had to be substantially rewritten. Which of the following risks associated with EUC application development could have led directly to this result?
a) End-user applications may not be adequately documented to facilitate review.
b) Segregation of duties would be inadequate if the same person performed programmer and operator functions.
c) End-user applications may not receive the independent testing associated with traditional development.
d) There may be insufficient review and analysis of user needs when user and analyst functions are no longer separate.

Answer 31

d) Unlike IT-developed and supported applications, user-developed applications are not reviewed by systems analysts prior to implementation. This lack of review may result in the rewrite of user-developed applications to better meet business requirements.

Question 32

Which of the following is an objective of logical security controls for information systems?
a) To restrict access to specific data and resources.
b) To provide an audit trail of the results of processing.
c) To ensure complete and accurate processing of data.
d) To ensure complete and accurate recording of data.

Answer 32

a) The primary objective of security controls for information systems is to restrict access to data and resources (both hardware and software) to only authorized individuals.

Question 33

Management information systems represent a significant investment by most businesses. A primary concern of management is that the system
a) Meet the business needs of the organization.
b) Employ the latest technology.
c) Might consume too much time and money during testing.
d) Was designed using CASE (Computer-Aided Software Engineering) tools rather than traditional methods.

Answer 33

a) A management information system (MIS) provides information for management decisions. The MIS must meet the needs of the organization or the cost will exceed any benefit to a business.

Question 34

Under a defined contribution pension plan, a(n) <List> is reported on the statement of financial position only if the amount the organization has contributed to the pension trust is <List> the amount required.</List></List>

a) Liability, Equal to
b) Asset, Equal to
c) Asset, Greater than
d) Liability, Greater than

Answer 34

c) Under a defined contribution plan, the employer recognizes an expense and a liability for the contribution payable in exchange for an employee’s services performed during the period. The amount is determined after subtracting any contribution already made. If the contribution made exceeds the amount due, the excess is treated as a prepaid expense (an asset).

Question 35

What is strategic planning?
a) It establishes the resources that the plan will require.
b) It establishes the general direction of the organization.
c) It establishes the budget for the organization.
d) It consists of decisions to use parts of the organization’s resources in specified ways.

Answer 35

b) Strategic planning establishes the general direction of an organization. It embodies the concerns of senior management and is based specifically on (1) identifying and specifying organizational objectives; (2) evaluating the organization’s strengths and weaknesses; (3) assessing risk levels; (4) identifying and forecasting the effect of external (environmental) factors relevant to the organization; (5) deriving the best strategy for reaching the objectives, given the organization’s strengths and weaknesses and the relevant future trends; and (6) analyzing and reviewing the capital budgeting process and capacity planning.

Question 36

When a user enters a certain entity’s system, a series of questions is asked of the user, including a name and mother’s birth date. These questions are primarily intended to provide
a) Access control to computer hardware.
b) Data integrity control.
c) Authentication of the user.
d) Authorization for processing.

Answer 36

c) Requiring specified information allows the computer to identify the user. This access control is intended to limit access to data and programs and the nature of that access.

Question 37

Which of the following should be management’s primary concern when reviewing a reciprocal disaster recovery agreement between two organizations?
a) Frequency of system testing.
b) Differences in information system policies and procedures.
c) Hardware and software compatibility.
d) The reliability of the business impact analysis.

Answer 37

c) A reciprocal disaster recovery agreement is an agreement between two or more organizations to share their resources after a major interruption. The primary concern when reviewing the agreement is whether the hardware and software of the participating organizations are compatible.

Question 38

A company owns 10,000 shares of a corporation’s stock; the corporation currently has 40,000 shares outstanding. During the year, the corporation had net income of $200,000 and paid $160,000 in dividends. At the beginning of the year, there was a balance of $150,000 in the company’s equity method investment in the corporation account. At the end of the year, the balance in this account should be
a) $240,000
b) $160,000
c) $150,000
d) $110,000

Answer 38

The company holds 25% (10,000 ÷ 40,000) of the corporation’s voting common stock. Under the equity method, (1) an investor recognizes its share of the investee’s net income as an increase in the investment account:
Investment in the corporation ($200,000 × 25%)
$50,000
Income – equity-method investee

$50,000
(2) a dividend from the investee is treated as a return of an investment:
Cash ($160,000 × 25%)
$40,000
Investment in the corporation
$40,000
Thus, at the end of the year, the balance in the investment in the corporation account is $160,000 ($150,000 + $50,000 – $40,000).

Question 39

Using the variable costing method, which of the following costs are assigned to inventory?

1) Variable Selling and
Administrative Costs

2 ) Variable Factory
Overhead Costs

a) No, No
b) Yes, No
c) Yes, Yes
d) No, Yes

Answer 39

d) Under variable costing, only variable manufacturing costs (not variable selling, general, and administrative costs) are assigned to inventory. Variable manufacturing overhead is a variable manufacturing cost. Thus, it is assigned to inventory.

Question 40

Of the following reasons for employees to resist a major change in organizational processes, which is least likely?
a) Threat of loss of jobs.
b) Required attendance at training classes.
c) Breakup of existing work groups.
d) Imposition of new processes by senior management without prior discussion.

Answer 40

b) Change management is important to all organizations. An appropriate balance between change and stability is necessary if an organization is to thrive. Employee training programs educate employees to perform jobs in a new or different way. Thus, they are a means of coping with employee resistance to change through facilitation and support of the change.

Question 41

An investor has been given several financial ratios for an entity but none of the financial reports. Which combination of ratios can be used to derive return on equity?
a) Price-to-earnings ratio and return-on-assets ratio.
b) Market-to-book-value ratio and total-debt-to-total-assets ratio.
c) Price-to-earnings ratio, earnings per share, and profit margin.
d) Profit margin, total assets turnover, and equity multiplier.

Answer 41

d) The profit margin equals the profit available to ordinary shareholders divided by sales, the total assets turnover equals sales divided by total assets, and the product of these two ratios is the return on assets. This result is the basic DuPont equation. In the extended DuPont equation, the return on assets is multiplied by the leverage factor, also called the equity multiplier (Total assets ÷ Ordinary equity at carrying amount). The extended DuPont equation gives the return on ordinary equity. This result is obtained because the total assets and sales factors cancel in the multiplication of the three ratios.

Question 42

A manufacturer is considering using bar code identification for recording information on parts used by the manufacturer. A reason to use bar codes rather than other means of identification is to ensure that
a) Vendors use the same part numbers.
b) The movement of all parts is recorded.
c) Vendors use the same identification methods.
d) The movement of parts is easily and quickly recorded.

Answer 42

d) Bar code scanning is a form of optical character recognition. Bar codes are a series of bars of different widths that represent critical information about the item. They can be read and the information can be instantly recorded using a scanner. Thus, bar coding records the movement of parts with minimal labor costs.

Question 43

A major disadvantage of the life cycle approach to system development is that it is not well-suited for projects that are
a) Complex.
b) Structured.
c) Large.
d) Unstructured.

Answer 43

d) The life cycle approach is best employed when systems are large and highly structured, users understand the tasks to be performed by the information system, and the developers have directly applicable experience in designing similar systems. In the life cycle process, each stage of development is highly structured, and requirements are clearly defined. However, when the task is unstructured, prototyping may be the better approach.

Question 44

Which of the following are conditions for a successful mentoring relationship?
The relationship should be aimed at improvement of the mentee.
The relationship should be based on growth of the mentee.
The pairing of mentor and mentee should be voluntary.
Mentoring requires a positive work environment.
a) 3 and 4
b) 1, 2, 3
c) 1, 2
d) 1, 2, 3, 4

Answer 44

b) Mentoring is systematic development of leadership by providing career counseling and social nurturing. It requires intensive tutoring, coaching, and guidance. Some organizations have formal mentoring programs that assign mentors to junior employees. But, some research indicates that a mentoring arrangement that occurs informally may have better results. Also, mentoring serves both career and psychosocial functions. Goals therefore should include improved job performance and career potential, with growth, not dependency, as the desired outcome. Mentoring can be helpful in any work environment.

Question 45

Which of the following would be of greatest concern to an auditor reviewing a policy regarding the sale of a company’s used personal computers to outside parties?
a) Whether deleted files on the hard disk drive have been completely erased.
b) Whether the computer has viruses.
c) Whether there is terminal emulation software on the computer.
d) Whether all software on the computer is properly licensed.

Answer 45

a) While most delete programs erase file pointers, they do not remove the underlying data. The company must use special utilities that fully erase the data. This is important because of the potential for confidential data on the personal computers.

Question 46

A national retailer required more detailed data to help stock its stores with the right products and to increase its turnover. Such data amounted to several gigabytes per day from each store. A new high-speed company-wide network was needed to transmit and analyze the data. The company wanted the features, functionality, and control of a sophisticated voice and data network without the cost of the components or the staff to maintain it. Which of the following options would be most suitable?
a) Local area network.
b) Private wide-area network.
c) Virtual private network.
d) Value-added network.

Answer 46

c) A virtual private network is a carrier-provided service in which the network provides capabilities similar to those of dedicated private lines but at a lower cost. In effect, an unlimited number of virtual networks can be created from the single common physical network. Virtual networks are made possible by intelligent networking technology, which provides the means for routing telephone calls over the best paths without dedicated lines.

Question 47

Which of the following is a true statement about volume-based value?
a) Rapid analysis capabilities provide businesses with the right decision in time to achieve their customer relationship management objectives.
b) In the digital era, capability to acquire and analyze varied data is extremely valuable.
c) The faster businesses can inject data into their data and analytics platform, the more time they will have to ask the right questions and seek answers.
d) The more data businesses have on the customers, both recent and historical, the greater the insights.

Answer 47

d) The more data businesses have on the customers, both recent and historical, the greater the insights is a true statement about volume-based value.

Question 48

Computer program libraries should be kept secure by
a) Installing a logging system for program access.
b) Restricting physical and logical access.
c) Monitoring physical access to program library media.
d) Denying remote access via terminals.

Answer 48

b) An important operating control is to establish a library to preclude misplacement, misuse, or theft of data files, programs, and documentation. A librarian should perform this custodianship function and be appropriately accountable. Restricting physical and logical access secures programs from unauthorized use, whether in person or remotely via terminals.

Question 49

If bonds are sold at a discount and the effective interest method of amortization is used, interest expense will
a) Remain constant from one period to another.
b) Be less than the cash interest payment each period.
c) Increase from one period to another.
d) Equal the cash interest payment each period.

Answer 49

c) Under the effective interest method, also called the effective rate method, of amortizing discount on bonds payable, periodic interest expense equals an ever-increasing carrying amount times a constant interest rate. Thus, interest expense increases from period to period.

Question 50

In which of the following situations would a narrower span of control be more appropriate?
a) Managers must spend a great deal of time coordinating with other managers.
b) Work performed by subordinates is substantially identical.
c) Managers do not spend a great deal of time on planning or strategic management.
d) Subordinates work in the same area rather than being geographically dispersed.

Answer 50

a) If substantial coordination is required, a manager benefits from reduced supervision requirements. In addition, increased coordination implies that the work done by subordinates is not standardized. As spans of control move from wider to narrower, the work done becomes less similar and more complex.

Question 51

Which of the following types of costs are prime costs?
a) Direct materials and overhead.
b) Direct labor and overhead.
c) Direct materials, direct labor, and overhead.
d) Direct materials and direct labor.

Answer 51

d) Prime costs for a manufacturer are direct materials and direct labor.

Question 52

Good planning will help an organization restore computer operations after a processing outage. Good recovery planning should ensure that
a) Planned changes in equipment capacities are compatible with projected workloads.
b) Change control procedures cannot be bypassed by operating personnel.
c) Service level agreements with owners of applications are documented.
d) Backup/restart procedures have been built into job streams and programs.

Answer 52

d) The disaster plan should embrace data center recovery, critical application recovery, and network recovery. It should be updated and current regarding recent test results and new applications, equipment, and network configurations. The plan should also ensure that backup facilities are still able to process critical applications and that end-user responsibility is established. Another essential component of a disaster recovery plan is that backup/restart procedures have been anticipated and provided for in the application systems.

Question 53

The IIA defines data analytics as “The process whereby data is identified, consolidated and quality checked and put into a format where analysis can be done with the goal of
a) Obtaining relevant results for the benefit of the organization.”
b) Providing operational, financial, and other data to the organization.”
c) Identifying useful information that better supports corporate decision making.”
d) Initiating opportunities for discussions with senior management and the board.”

Answer 53

c) The IIA defines data analytics as “The process whereby data is identified, consolidated and quality checked and put into a format where analysis can be done with the goal of identifying useful information that better supports corporate decision making.”

Question 54

To ensure privacy in a public-key encryption system, knowledge of which of the following keys would be required to decode the received message?
1) Private
2)Public

a) Neither 1 nor 2.
b) 1.
c) 2.
d) Both 1 and 2.

Answer 54

b) In a public-key system, the public key is used to encrypt the message prior to transmission, and the private key is needed to decrypt (decode) the message.

Question 55

Which of the following statements about operating systems is true?
a) An operating system is a set of instructions that directs a computer to perform certain tasks and produce certain results.
b) An operating system is a link to a system that allows users to use icons rather than command words to initiate processing.
c) An operating system is a set of instructions that controls a computer or a communication network.
d) An operating system is a combination of programs that coordinates the actions of a computer, including its peripheral devices and memory.

Answer 55

d) Systems software performs the fundamental tasks needed to manage computer resources. The most basic piece of systems software is the operating system. An operating system is an interface among users, application software, and the computer’s hardware (CPU, disk drives, printers, communications devices, etc.).

Question 56

One of the keys to successful redesigning of jobs in order to motivate employees is
a) Enlarging jobs by adding more tasks similar to tasks being performed.
b) Creating autonomous work teams.
c) Rotating workers to different jobs to provide the workers with variety.
d) Changing the content of jobs so that the jobs fit each worker’s need for growth.

Answer 56

d) One of the major principles of successful job design and redesign is to consider employee needs and skills and match them with jobs. An alternative is to change the jobs to fit those needs and skills. The objective is to conform to strengths and to avoid weaknesses.

Question 57

Which of the following best describes a market synergy?
a) Use of complementary management skills to achieve entry into a new market.
b) Bundling of products distributed through the same channels.
c) Production of multiple products at one facility.
d) Technology transfer from one product to another.

Answer 57

b) Market synergy arises when products or services have positive complementary effects. Shopping malls reflect this type of synergy. Also, bundling of products, distribution through the same distribution channels, and use of the same sales force are other examples of market synergies.

Question 58

The efficient markets theory implies that securities prices are
a) Fair and a reflection of all publicly available information.
b) Always less than their fair value.
c) Not the best benchmark for corporate financial decisions.
d) Not a good estimate of future cash flows.

Answer 58

a) The efficient markets theory proposes that the market is continuously adjusting to new information and acting to correct pricing errors.

Question 59

Which of the following is a malicious program, the purpose of which is to reproduce itself throughout the network and produce a denial of service attack by excessively utilizing system resources?
a) Logic bomb.
b) Virus.
c) Trojan horse.
d) Worm.

Answer 59

d) A worm is an independent program that reproduces by copying itself from one system to another over a network and consumes computer and network resources.

Question 60

During the audit of a construction contract, it was discovered that the contractor was being paid for each ton of dirt removed. The contract called for payment based on cubic yards removed. Which internal control might have prevented this error?
a) Extension checks of invoice amounts.
b) Comparison of actual costs with budgeted costs.
c) Comparison of invoices with receiving reports.
d) Comparison of invoices with purchase orders or contracts.

Answer 60

d) The contractor’s invoice would have stated a unit of measure different from that in the contract. Thus, a comparison of the invoice with the original contract would have disclosed the error.

Question 61

Which of the following products are most likely to be accounted for using process costing?
a) Custom pipe fittings.
b) Hair styling services.
c) Thread.
d) Luxury cars.

Answer 61

c) Process costing applies to relatively homogeneous products that are mass produced on a continuous basis. Examples are petroleum products, thread, and computer monitors.

Question 62

A domestic company has sales divisions in country X and country Y. The company sells only one product. There are no trade barriers or tariffs among the three countries. Information specific to each of the three countries is as follows:
Home - Tax Rate 50%
Country X - Tax Rate 60%
Country Y - Tax Rate 40%

When selling items to its sales division(s) in <List>, the company should set the <List> allowable transfer price.</List></List>

a) Country x, highest
b) Country X & Y, highest
c) Country X & Y, lowest
d) Country y, highest

Answer 62

a) Country X has a higher tax rate than the home country, so the incentive is to transfer profits out of country X. The sales division in country X will be less profitable and pay a lower tax if it is charged a high transfer price.

Question 63

All of the following are true statements about big data except
a) Big data is an evolving term that describes any voluminous amount of structured, semi-structured, and unstructured data that has the potential to be mined for information.
b) Big data processes data with analytic and algorithmic tools to reveal meaningful information.
c) Big data includes information collected from social media, data from Internet-enabled devices, machine data, video, and voice recordings. The information collected is converted from high-density data into low-density data.
d) Big data is often characterized by the “4 Vs” – volume, variety, velocity, and veracity.

Answer 63

c) Big data includes information collected from social media, data from Internet-enabled devices, machine data, video, and voice recordings. The information collected is converted from low-density data into high-density data. Thus, the statement about big data is false.

Question 64

Which of the following represents the procedure managers use to identify whether the company has information that unauthorized individuals want, how these individuals could obtain the information, the value of the information, and the probability of unauthorized access occurring?
a) Disaster recovery plan assessment.
b) Test of controls.
c) Risk assessment.
d) Systems assessment.

Answer 64

c) The risk assessment forms the core of an organization’s contingency planning. A risk assessment involves assessing (1) the types of vulnerabilities to which each of the organization’s critical systems is subject, (2) the likelihood of each of the vulnerabilities being exploited, and (3) countermeasures to be taken, both preventive measures to stop the occurrence of breaches and corrective measures to compensate in the event of breaches.

Question 65

In conducting an audit of an organization’s disaster recovery capability, which of the following would an auditor consider to be the most serious weakness?
a) Tests use recovery scripts.
b) Hot-site contracts are 2 years old.
c) Only a few systems are tested annually.
d) Backup media are stored on-site.

Answer 65

d) A crucial element of business recovery is the existence of a comprehensive and current disaster recovery plan. A comprehensive plan provides for (1) emergency response procedures, (2) alternative communication systems and site facilities, (3) information systems backup, (4) disaster recovery, (5) business impact assessments and resumption plans, (6) procedures for restoring utility services, and (7) maintenance procedures for ensuring the readiness of the organization in the event of an emergency or disaster. Storing backup media on-site is a weakness in the plan. They should not be located where they can be affected by the same event that interrupted the system’s activities.

Question 66

The best source of evidence to determine if ex-employees continue to have access to a company’s computer systems is
a) Reviewing computer logs of access attempts.
b) Reviewing access control software to determine whether the most current version is implemented.
c) Discussing the password removal process with the information security officer.
d) Reconciling current payroll lists with database access lists.

Answer 66

d) To determine if ex-employees are accessing the company’s computer systems, the auditor should obtain the log showing system accesses. This log should be compared with current payroll lists to see if anyone not on the payroll is still accessing or is able to access the systems.

Question 67

The process of adding resources to shorten selected activity times on the critical path in project scheduling is called
a) Crashing.
b) The Delphi technique.
c) ABC analysis.
d) A branch-and-bound solution.

Answer 67

a) Crashing is the process of adding resources to shorten activity times on the critical path in project scheduling.

Question 68

Which of the following is not an effective principle for guiding a manager’s use of leadership techniques?
a) Follow written procedures at all times.
b) Serve as a model of the behavior expected from others.
c) Value differences.
d) Value accountability.

Answer 68

a) Leadership is the act or process of influencing, inspiring, and guiding people so they will strive willingly toward the achievement of group objectives through common effort. Much management research has been devoted to determining the traits of leaders, leadership styles, and the situations in which particular styles are effective. However, a blind focus on internal process is a habit of administration, not of leadership. A manager of this type is called a bureaucratic leader. In the absence of a specific policy or procedure, (s)he seeks guidance from the next level of management. In some situations, for example, when employees handle cash or highly delicate or dangerous equipment or chemicals, bureaucratic leadership may be needed.

Question 69

A firm has a strategic business unit (SBU) that has a low market share in a high growth market. To maintain even this low share of the market requires the firm to commit a significant amount of cash. The firm might successfully adopt a build strategy for this unit if the
1. SBU shows a strong potential to grow and obtains a significant share of the market.
2. Firm can finance its growth.
3. Firm expects a short-term increase in cash flow.
4. Firm is willing to forgo short-term earnings.

a) 1, 2, and 4 only.
b) 1 only.
c) 2 and 3 only.
d) 3 and 4 only.

Answer 69

a) One of the two portfolio models most frequently used for competitive analysis was created by the Boston Consulting Group (BCG). This model, the growth-share matrix, has two variables. The business growth rate (BGR) is on the vertical axis, and the firm’s relative market share (RMS) is on the horizontal axis. The growth-share matrix has four quadrants. The firm’s SBUs are commonly represented in their appropriate quadrants by circles. The size of a circle is directly proportional to the SBU’s sales volume. Question marks (low RMS, high BGR) are weak competitors in high-growth markets. They need large amounts of cash not only to finance growth and keep pace with the market but also to increase RMS, but do poorly in cash generation. If RMS increases significantly, a question mark may become a star. If not, it becomes a dog. A build strategy is necessary for a question mark with the potential to be a star. Consequently, a firm may adopt a build strategy for this type of SBU if it shows a strong potential to grow, if the firm is willing to forgo short-term earnings and cash flow, and if the firm is willing and has the capacity to finance its growth. However, a firm that expects only a short-term increase in cash flow may adopt either a divest or a harvest strategy but not a build strategy. This type of SBU needs a lot of cash flow to finance its growth.

Question 70

Which type of contract should be used if there is adequate competition, performance uncertainties can be identified, and reasonable estimates of the cost can be made?
a) Cost-plus-award-fee contract.
b) Firm-fixed-price contract.
c) Time-and-materials contract.
d) Cost-plus-fixed-fee contract.

Answer 70

b) A firm-fixed-price contract has a price that cannot be changed even if costs increase unexpectedly. It should be used when (1) price competition is adequate, (2) reasonable price comparisons and estimates of costs can be made, and (3) performance uncertainties can be identified.

Question 71

A total interruption of processing throughout a distributed information technology system can be minimized through the use of
a) Fault tolerance.
b) Backup and recovery.
c) Data file security.
d) Exception reporting.

Answer 71

a) An advantage of distributed processing is fault tolerance, that is, the ability to continue processing at all sites except a nonfunctioning one.

Question 72

An information system (IS) project manager is currently in the process of adding a systems analyst to the IS staff. The new systems analyst will be involved with testing the new computerized system. At which stage of the systems development life cycle will the analyst be primarily used?
a) Flowcharting.
b) Development.
c) Requirements definition.
d) Cost-benefit analysis.

Answer 72

b) The systems development life-cycle approach is the oldest methodology applied to the development of medium or large information systems. The cycle is analytically divisible into stages: definition, design, development, implementation, and maintenance. Testing is the most crucial step in the development stage of the life cycle.

Question 73

What is the best course of action to take if a program takes longer than usual to load or execute?
a) Back up the hard disk files to floppies.
b) Test the system by running a different application program.
c) Reboot the system.
d) Run antivirus software.

Answer 73

d) The described condition is a symptom of a virus. Many viruses will spread and cause additional damage. Use of an appropriate antivirus program may identify and even eliminate a viral infection. Ways to minimize computer virus risk in a networked system include restricted access, regularly updated passwords, periodic testing of systems with virus detection software, and the use of antivirus software on all shareware prior to introducing it into the network.

Question 74

To maintain effective segregation of duties within the information technology function, an application programmer should have which of the following responsibilities?
a) Maintain custody of the billing program code and its documentation.
b) Correct detected data entry errors for the cash disbursement system.
c) Code approved changes to a payroll program.
d) Modify and adapt operating systems software.

Answer 74

c) Applications programmers design, write, test, and document computer programs according to specifications provided by the end users. The programmers are responsible for designing, building, and maintaining the organization’s applications. Under no circumstances should programmers be able to make changes directly to programs that are used in “live” production. A separate processing area devoted to development and testing should be set up and dedicated to the use of programmers.

Question 75

Which of the following is a product cost for a manufacturing company?
a) Property taxes on a factory.
b) Depreciation on a salesperson’s vehicle.
c) The salary of a sales manager.
d) Insurance on the corporate headquarters building.

Answer 75

a) Product costs such as material, labor, and overhead attach to the product and are carried in future periods if the revenue from the product is recognized in subsequent periods. Period costs are expensed immediately because no direct relationship between cost and revenue exists.

Question 76

Rework costs should be regarded as a cost of quality in a manufacturing company’s quality control program when they are
1. Caused by the customer
2. Caused by internal failure

a) Neither I nor II.
b) II only.
c) I only.
d) Both I and II.

Answer 76

b) Internal failure costs are those incurred when detection of defective products occurs before shipment. Examples are scrap, rework, tooling changes, and downtime. The costs of external failure, e.g., warranty, product liability, and customer ill will, arise when problems occur after shipment.

Question 77

An auditor has just completed a physical security audit of a data center. Because the center engages in top-secret defense contract work, the auditor has chosen to recommend biometric authentication for workers entering the building. The recommendation might include devices that verify all of the following except
a) Fingerprints.
b) Speech patterns.
c) Password patterns.
d) Retina patterns.

Answer 77

c) Biometric technologies are automated methods of establishing an individual’s identity using physiological or behavioral traits. These characteristics include fingerprints, retina patterns, hand geometry, signature dynamics, speech, and keystroke dynamics.

Question 78

In a large organization, the biggest risk in not having an adequately staffed information center help desk is
a) Persistent errors in user interaction with systems.
b) Inadequate documentation for application systems.
c) Increased likelihood of use of unauthorized program code.
d) Increased difficulty in performing application audits.

Answer 78

a) The biggest risk in not having an adequately staffed help desk is that users will unknowingly persist in making errors in their interaction with the information systems.

Question 79

Which of the following will not reduce risk associated with illegal access to an organization’s network through the Internet?
a) Using token ring technology for local area networks.
b) Configuring routers to accept only predefined Internet protocol addresses.
c) Requiring the use of data encryption for all transmitted files.
d) Establishing a series of computers to serve as system firewalls.

Answer 79

a) A local area network (LAN) connects devices within an organization and allows them to communicate with each other. Token ring technology merely facilitates communication across the LAN. It does not reduce the risk of illegal access to an organization’s network through the Internet.

Question 80

Which of the following hiring procedures provides the most control over the accuracy of information submitted on an employment application?
a) Letters of recommendation that attest to the applicant’s character must be mailed directly to the hiring organization rather than being submitted by the applicant.
b) Applicants are required to submit unofficial copies of their transcripts along with the application as verification of their educational credentials.
c) The hiring organization calls the last place of employment for each finalist to verify the employment length and position held.
d) Applicants are required to sign a statement that the information on the application is true and correct as a confirmation of its truth.

Answer 80

c) Calling the last place of employment for candidates to verify information represents an independent verification of employment. The hiring organization is performing the verification proce

Question 81

Which of the following is not one of the reasons organizations use data analytics?
a) To rule out proposed strategic plans.
b) To strengthen data integrity.
c) To identify any deviations from the norm.
d) To make well supported decisions.

Answer 81

b) Strengthened data integrity and a reduction in data is the result of normalizing data by storing each data element as few times as necessary and is not one of the reasons organizations use data analytics. Data analytics involves qualitative and quantitative methodologies and procedures to retrieve data out of data sources and then to inspect the data in accordance with predetermined requirements. Data analytics are used to evaluate operational, financial, and other data to identify any deviations from the norm. Data analytics can be used to make well supported decisions and to formulate strong business models. Organizations can use these analytics to rule out proposed strategic plans and models that would not be beneficial or work for the organization.

Question 82

All of the following are true statements about velocity-based value except
a) The more data businesses have on the customers, both recent and historical, the greater the insights.
b) The faster businesses can inject data into their data and analytics platform, the more time they will have to ask the right questions and seek answers.
c) Rapid analysis capabilities provide businesses with the right decision in time to achieve their customer relationship management objectives.
d) The computing power required to quickly process huge volumes and varieties of data can overwhelm a single server or multiple servers. Organizations must apply adequate computer power to big data tasks to achieve the desired velocity.

Answer 82

a) The more data businesses have on the customers, both recent and historical, the greater the insights is a true statement about volume-based value.

Question 83

Profit margin is calculated by
a) The ratio of profit to sales.
b) The ratio of profit before interest and taxes to sales
c) The ratio of profit before tax to sales
d) The ratio of gross profit to sales

Answer 83

a) The profit margin is the ratio of profit to sales.

Question 84

An overall description of a database, including the names of data elements, their characteristics, and their relationship to each other, is defined by using a
a) Data command interpreter language.
b) Data definition language.
c) Data control language.
d) Data manipulation language.

Answer 84

b) The data definition language defines the database structure and content, especially the schema (the description of the entire database) and subschema (logical views of the database). The schema specifies characteristics such as the names of the data elements contained in the database and their relationship to each other. The subschema defines the logical data views required for applications, which limits the data elements and functions available to each application.

Question 85

A contract contains several promises made by each of the parties, and performance of every promise has not yet been performed. This contract is
a) Voidable.
b) Executed.
c) Formal.
d) Executory.

Answer 85

d) A contract is executory if any duty remains to be performed.

Question 86

The best evidence that contingency planning is effective is to have
a) Signoff on the plan by the internal audit activity.
b) Successful testing of the plan.
c) Comprehensive documentation of the plan.
d) No processing interruptions during the past year.

Answer 86

b) The only way to know whether contingency planning has been effective is to test the plan, by simulating an interruption or by conducting a paper test with a walk-through of recovery procedures.

Question 87

Which of the following are key technologies of big data?
1. In-memory analytics
2. Data mining
3. Text mining

Answer 87

Key technologies of big data include data mining, text mining, data management, in-memory analytics, predictive analytics, and Hadoop.

Question 88

A shortest-route algorithm is used in network models to
a) Identify bottlenecks in a network and identify the longest path.
b) Minimize total travel time from one site to each of the other sites in a transportation system.
c) Identify the set of connecting branches having the shortest combined length.
d) Maximize throughput in networks with distinct entry (source node) and exit (sink node) points.

Answer 88

b) Network models are used to solve managerial problems pertaining to project scheduling, information systems design, and transportation systems design. Networks consisting of nodes and arcs may be created to represent in graphic form problems related to transportation, assignment, and transshipment. The shortest-route, minimal spanning tree, and maximal flow problems are other applications of network models. A shortest-route algorithm minimizes total travel time from one site to each of the other sites in a transportation system.

Question 89

Passwords for personal computer software programs are designed to prevent
a) Inaccurate processing of data.
b) Unauthorized use of the software.
c) Incomplete updating of data files.
d) Unauthorized access to the computer.

Answer 89

b) The use of passwords is an effective control in an online system to prevent unauthorized access to computer files. Lists of authorized users are maintained in the computer. The entry of passwords or ID numbers; a prearranged set of personal questions; and use of badges, magnetic cards, or optically scanned cards may be combined to avoid unauthorized access.

Question 90

Which of the following statements is(are) correct regarding electronic mail security?
1. Electronic mail can be no more secure than the computer system on which it operates.
2. Confidential electronic mail messages should be stored on the mail server as electronic mail for the same length of time as similar paper-based documents.
3. In larger organizations, there may be several electronic mail administrators and locations with varying levels of security.

Answer 90

1 & 3 Only

Electronic mail can be no more secure than the computer system on which it operates. Also, in larger organizations, there may be several electronic mail administrators and locations with varying levels of security.

Question 91

What language interface would a database administrator use to establish the structure of database tables?
a) Data definition language.
b) Data query language.
c) Data manipulation language.
d) Data control language.

Answer 91

a) The schema is a description of the overall logical structure of the database using data-definition language (DDL), which is the connection between the logical and physical structure of the database. DDL is used to define, or determine, the database.

Question 92

A curve on a graph with the rate of return on the vertical axis and time on the horizontal axis depicts
a) A series of payments of a fixed amount for a specified number of years.
b) The present value of future returns, discounted at the marginal cost of capital, minus the present value of the cost.
c) The internal rate of return on an investment.
d) A yield curve showing the term structure of interest rates.

Answer 92

d) The term structure of interest rates is the relationship between long- and short-term interest rates, that is, between yield to maturity and time to maturity. It is graphically depicted by a yield curve with a rate of return on the vertical axis and time to maturity on the horizontal axis. If short-term rates are higher than long-term rates, the curve will be downward sloping. If the reverse is true, the curve will be upward sloping.

Question 93

An organization has outsourced many services, including waste collection, cafeteria, and custodial services previously performed internally. Management requests an evaluation of contract compliance and the overall performance of the organizations performing the outsourced activities. Which of the following engagement procedures is the least effective in accomplishing the engagement objectives?
a) A survey of users’ satisfaction with the services performed by the outsourcer.
b) Comparison of identified activities for each outsourcer with “best practices” of other outsourcers.
c) Comparison of charges with the terms of the outsourcing contract.
d) Comparison of current costs with the costs of performing the same services before they were outsourced.

Answer 93

b) The engagement is to determine whether (1) the objectives of the outsourcer (the outsourcing entity) were achieved at the lowest cost to the organization and (2) the external service provider is complying with the terms of the contract. The efficiency of the outsourcer is not an issue if the cost to the organization is the best available. Furthermore, “best practices” for outsourcers are scarcely documented.

Question 94

All of the following are true statements about businesses deciding to utilize cloud computing for big data projects except
a) Businesses are hesitant to invest in an extensive server and storage infrastructure that might only be used occasionally to complete big data tasks.
b) A public cloud provider can store petabytes of data and scale up thousands of servers just long enough to accomplish the big data project.
c) Businesses only pay for the storage and computing time actually used.
d) Analysts are not required to have a detailed understanding of the available data and possess some sense of what answer(s) they are looking for.

Answer 94

d) Analysts are not required to have a detailed understanding of the available data and possess some sense of what answer(s) they are looking for is an incorrect statement. Analysts must have a detailed understanding of the available data and possess some sense of the answers they are looking for. The value of data is only as valuable as the business outcomes it makes possible. It is how businesses make use of data that allows full recognition of its true value and the potential to improve decision-making capabilities and measure them against the results of positive business outcomes.

Question 95

Which of the following should be implemented and configured to ensure that malicious requests are not submitted to web applications?
a) Stateful inspection firewall.
b) Packet filtering system.
c) Application gateway.
d) Proxy server.

Answer 95

c) An application gateway is an application-level proxy that resides on the client and server firewall. It filters incoming traffic to certain specifications and prevents malicious requests from being submitted to web applications.

Question 96

Which of the following operating procedures increases an organization’s exposure to computer viruses?
a) Frequent backup of files.
b) Downloading public-domain software from websites.
c) Encryption of data files.
d) Installing original copies of purchased software on hard disk drives.

Answer 96

b) Viruses are spread through shared data. Downloading public-domain software carries a risk that contaminated data may enter the computer.

Question 97

Which of the following is true of individual decision making, compared to group decision making?
a) Individual decision making is more conservative.
b) Individual decision making generates more alternatives.
c) Individual decision making increases the perceived legitimacy of the decision.
d) Individual decision making evaluates more complete information.

Answer 97

a) Individual decision making is more conservative than group decision making. Groups submerge individual identity and responsibility and conceal the connection between individual effort and outcome. Thus, greater acceptance of risks results because accountability is dispersed.

Question 98

An entity’s receivables collection period is equal to the
a) Inventory divided by average daily sales.
b) Inventory conversion period.
c) Cash conversion cycle.
d) Days’ sales outstanding.

Answer 98

d) The average collection period (days’ sales in receivables) is the average time required to convert the entity’s receivables into cash. It is also called the receivables collection period.