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AIS > Test 3 > Flashcards

Test 3 Flashcards

1
Q

The credit approval process involves which of the following?

a. Establishing a credit limit
b. Investigating the credit history of the customer
c. Verifying the customer order does not exceed an authorized limit
d. All of the above.

A

d.All of the above.

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2
Q

The billing activity part of the revenue cycle includes the following: a.shipping

b. updating accounts receivable
c. making bank deposits
d. approving customer credit

A

b.updating accounts receivable

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3
Q

The open invoice method involves which of the following activities?a.customers pay from a balance on a monthly statement.

b. remittances are applied against a total account balance.
c. customers pay specific invoices.
d. None of the above.

A

c.customers pay specific invoices.

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4
Q

A credit memo

a. is issued by the customer.
b. is issued by the cashier.
c. is issued by the credit manager.
d. increases accounts receivable.

A

c.is issued by the credit manager.

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5
Q

Aging of accounts receivable is based on the:

a. sales order date
b. picking ticket date
c. invoice date
d. bill of lading date

A

c.invoice date

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6
Q

Which of the following provide useful information for evaluating current credit policies and for deciding whether to increase the credit limit for specific customers?

a. Cash budget
b. Profitability analysis reports
c. Sales analysis reports
d. Accounts receivable aging schedule
e. None of the above.

A

d.Accounts receivable aging schedule

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7
Q

Which of the following is a threat to the Sales Order Entry Processing activity of the Revenue Cycle?

a. Uncollectible accounts.
b. Failure to bill.
c. Billing errors.
d. Theft of inventory.

A

a.Uncollectible accounts.

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8
Q

Which of the following is NOT a control for mitigating the risk of posting errors in accounts receivable?

a. Data entry controls.
b. Set proper credit limits.
c. Reconciliation of batch totals.
d. Mailing monthly statements to customers.

A

b.Set proper credit limits.

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9
Q

Operational data is needed to monitor performance and to perform the following recurring tasks:

a. Respond to customer inquiries about account balances and order status
b. Select methods for delivering merchandise
c. Determine inventory availability
d. B and C
e. All of the above

A

e.All of the above

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10
Q

Which of the following is NOT a threat associated with billing and accounts receivable?

a. Failure to bill customers
b. An error in billing
c. Posting errors in updating accounts receivable
d. Theft of cash

A

d.Theft of cash

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11
Q

Steps to reduce the risk of inventory theft include:

a. inventory is kept in a secure location, with limited physical access.
b. all inventory transfers within the company are documented.
c. inventory is released only upon approved sales orders.
d. All of the above.

A

d.All of the above.

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12
Q

The control known as closed loop verification is associated with:

a. accuracy of updating customer accounts.
b. preventing the theft of cash.
c. encryption controls.
d. separation of billing and shipping functions.

A

a.accuracy of updating customer accounts.

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13
Q

A general threat throughout the revenue cycle includes:

a. Loss or destruction of data
b. Invalid orders
c. Theft of inventory
d. All of the above
e. None of the above

A

a.Loss or destruction of data

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14
Q

A useful report for management to control for the threat of uncollectible accounts is:

a. Customer list
b. Accounts receivable aging report
c. Sales order report
d. Inventory report

A

b.Accounts receivable aging report

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15
Q

The following lists the quantity and description of each item included in the shipment:

a. Picking ticket
b. Bill of lading
c. Sales order
d. Packing slip

A

d.Packing slip

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16
Q

The two basic methods to maintain accounts receivable are:

a. Real-time and open-invoice
b. Real-time and balance-forward
c. Open-invoice and balance-forward
d. None of the above

A

c. Open-invoice and balance-forward

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17
Q

The applicable control procedure for the threat of incomplete or inaccurate customer orders is:

a. Customer relationship management (CRM)
b. Segregation of duties
c. Data entry edit controls
d. Reconciliation of sales order with the picking ticket

A

c. Data entry edit controls

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18
Q

The applicable control for theft of cash is:

a. Lockboxes
b. Segregation of duties
c. Use of cash registers
d. All of the above

A

d.All of the above

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19
Q

The threat of inaccurate inventory records can be mitigated by which of the following controls?

a. Bar coding or RFID tags
b. Review of purchase orders
c. Verification of invoice accuracy
d. Supplier audits
e. None of the above.

A

a.Bar coding or RFID tags

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20
Q

Ordering unnecessary items can result from:

a. Competitive bidding.
b. Inaccurate perpetual inventory records.
c. Require receiving employees to sign the receiving report.
d. None of the above.

A

b.Inaccurate perpetual inventory records.

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21
Q

What is a method that companies use to minimize the risk of inferior quality products?

a. Tracking and monitoring product quality by supplier.
b. Using encryption techniques
c. Providing adequate storage
d. All of the above.

A

a.Tracking and monitoring product quality by supplier.

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22
Q

The practice of allowing kickbacks:

a. improves the position of the company.
b. results in higher quality purchases.
c. impairs the objectivity of the purchaser.
d. provides quantity discounts.

A

c.impairs the objectivity of the purchaser.

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23
Q

What is the most effective technique used to minimize the risk of an inaccurate inventory counts?

a. Quick visual comparison of amounts received and those indicated on the packing slip
b. Using the Economic Order Quantity model
c. The use of a bar-coding or radio frequency identification tag (RFID) system
d. The use of just-in-time (JIT) accounting systems.

A

c.The use of a bar-coding or radio frequency identification tag (RFID) system

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24
Q

An effective method of reducing the risk of inventory theft is

a. an annual inventory count.
b. proper segregation of duties.
c. requiring the employee who maintains custody of inventory to also record inventory transactions.
d. All of the above.
e. None of the above.

A

b.proper segregation of duties.

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25
Q

What control procedures reduce the risk of paying the same invoice twice?

a. Invoices are approved for payment only when accompanied by a complete voucher packet.
b. Only the original invoice copy should be paid.
c. Paid invoices should be marked “paid”.
d. Payment should never be made on an invoice copy.
e. All of the above.

A

e.All of the above.

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26
Q

Which inventory system attempts to minimize inventory costs by only purchasing goods required for actual sales orders?

a. Material requirements planning (MRP)
b. Economic order quantity (EOQ)
c. Just-in-time (JIT)
d. Reorder point

A

c.Just-in-time (JIT)

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27
Q

What are the typical expenditure cycle functions?

a. Verify the accuracy of vendor invoices
b. Select the appropriate vendors from whom to order
c. Decide if appropriate discounts have been taken
d. Monitor cash flow needed to pay obligations
e. All of the above.

A

e.All of the above.

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28
Q

The major cost driver in the purchasing function is:

a. the number of purchase orders processed
b. the price of the items purchased
c. the reputation of the supplier
d. none of the above.

A

a.the number of purchase orders processed

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29
Q

The risk of receiving unordered goods is prevented most effectively by

a. surprise audits.
b. recalculation of invoice prices.
c. instruct the receiving department to accept deliveries only those goods where there is an approved copy of the purchase order.
d. All of the above.

A

c.instruct the receiving department to accept deliveries only those goods where there is an approved copy of the purchase order.

30
Q

Which of the following is least likely to be a major criterion in vendor selection?

a. prices of goods
b. credit rating of the vendor
c. quality of goods
d. ability to deliver on time

A

b.credit rating of the vendor

31
Q

The document used to request that an item be ordered is the:

a. purchase order
b. purchase requisition
c. purchase advice
d. purchase auction

A

b.purchase requisition

32
Q

A receiving report is typically not used for:

a. low cost supply items
b. items ordered on blanket purchase orders
c. receipt of services
d. reoccurring items

A

c. receipt of services

33
Q

One of the basic activities in the expenditure cycle is the receiving and storage of goods, supplies, and services. What is the counterpart of this activity in the revenue cycle?

a. sales order entry process
b. shipping function
c. cash collection activity
d. cash payments activity

A

b.shipping function

34
Q

Which of the following controls can minimize the threat of mistakes in counting incoming inventory?

a. The use of positive pay.
b. Do not inform receiving employees about quantity ordered.
c. The use of ERS.
d. Perpetual inventory system.

A

b.Do not inform receiving employees about quantity ordered.

35
Q

The ________ specifies the point at which inventory is needed. a.company inventory policies

b. reorder point
c. economic order quantity
d. stockout point

A

b.reorder point

36
Q

A corporation provides free coffee to employees. A local coffee shop delivers coffee packages, sugar, creamer, and filters each week. Every month, the coffee shop sends the corporation invoice. This arrangement is best described as a

a. set purchase order.
b. fixed purchase order.
c. blanket purchase order.
d. standard purchase order.

A

c. blanket purchase order.

37
Q

Identify the department below that should not be able to submit a purchase requisition.

a. Marketing
b. Production
c. Inventory Control
d. None of the above

A

d.None of the above

38
Q

Adjusting entries include each of the following:

a. accruals.
b. deferrals.
c. estimates.
d. revaluations.
e. All of the above.

A

e.All of the above.

39
Q

Which of the following controls best addresses the threat of inaccurate adjusting entries?

a. Spreadsheet error protection controls
b. Audit trail creation and review
c. Processing integrity controls.
d. All of above.

A

d.All of above.

40
Q

The problem(s) with static budgets include the following:

a. they establish one set of budgetary figures, regardless of the actual output level.
b. they may not be perceived as fair or accurate by production managers.
c. They are not compatible with a balanced scorecard.
d. Both answers a and b.

A

a. they establish one set of budgetary figures, regardless of the actual output level.
b. they may not be perceived as fair or accurate by production managers.

41
Q

When updating the general ledger, sales, purchases, and production are examples of ___________ entries, and issuance or retirement of debt and the purchase or sale of investment securities are examples of ___________ entries.

a. adjusting; controller originated
b. accounting subsystem; treasurer originated
c. adjusting; special journal
d. controller generated; special journal

A

b.accounting subsystem; treasurer originated

42
Q

Which of the following techniques assist with meeting general ledger control objectives?

a. Using pre-numbered journal entries
b. The use of validity checks
c. Restricting access to general ledger programs
d. All of the above.
e. None of the above.

A

d.All of the above.

43
Q

The threat of loss or alteration of financial data can be minimized by:

a. encryption.
b. access controls.
c. Audit trail creation and review
d. Answer a and Answer b

A

d.Answer a and Answer b

44
Q

The balanced scorecard

a. focuses on activities which most directly impact customer perceptions.
b. focuses on activities which compose the accounting cycle.
c. focuses on activities which form the basis of adjusting entries.
d. focuses on activities which form manager satisfaction.
e. None of the above.

A

a.focuses on activities which most directly impact customer perceptions.

45
Q

Which of the following does NOT make bar graphs easier to read? (Recall Ch. 7)

a. Utilizing titles that summarize the basic message
b. Utilizing 3-D bars
c. Utilizing 2-D bars
d. Using differing shades of gray or colors to represent different variables

A

b.Utilizing 3-D bars

46
Q

Which of the following controls can minimize the threat of poorly designed reports and graphs?

a. Training and experience in applying IFRS and XBRL.
b. Responsibility accounting.
c. Backup and disaster recovery procedures.
d. Restriction of access to general ledger.

A

b.Responsibility accounting.

47
Q

Which element of the balanced scorecard would be represented by the return on equity?

a. Financial
b. Internal operations
c. Innovation and learning
d. Customer perspectives of the organization
e. Not represented in the balanced scorecard

A

a.Financial

48
Q

To minimize the risk of an unscrupulous manager that can conceal theft of assets or poor performance by altering information in the general ledger. Which of the following statements represents and appropriate control?

a. Employ read-only privileges to portions of the system necessary to perform assigned duties.
b. Employ an access control matrix designed to limit the functions that can be performed by users.
c. Review all changes made to the general ledger data.
d. All of the above.

A

d.All of the above.

49
Q

The third basic activity in the accounting system which produces financial statements is:

a. post adjusting entries
b. prepare financial statements
c. update general ledger
d. produce managerial reports

A

b.prepare financial statements

50
Q

The act of tracing any transaction from its original source document (whether paper or electronic) to the journal entry that updated the general ledger and to any report or other document using that data:

a. Provides a means to verify that all transactions are recorded correctly
b. Provides a means to verify that all transactions were authorized
c. Provides a means to verify that all authorized transactions were recorded correctly
d. All of the above

A

c. Provides a means to verify that all authorized transactions were recorded correctly

51
Q

A report that lists the balances for all general ledger accounts is called:

a. Balance Sheet
b. Trial Balance
c. Audit Trail
d. Journal entry control report

A

b.Trial Balance

52
Q

The _____ posts the adjusting journal entries after the trial balance has been prepared.

a. finance department
b. controller’s office
c. treasurer’s office
d. COO

A

c. treasurer’s office

53
Q 
The following are the three basic financial statements:
1.Balance sheet
2.Income statement 
3.Statement of cash flows
The correct order in preparing these financial statements is:
a.2, 1, 3
b.1, 2, 3
c.   1, 3, 2
d.2, 3, 1
e.3, 1, 2
A

a.2, 1, 3

54
Q

The power of XBRL lies in the information provided by its:

a. edit checks
b. tags
c. data marks
d. none of the above

A

b.tags

55
Q

An accountant received the following error message while making an adjusting entry to the general ledger: “Your journal entry must be a numeric value. Please reenter.” This is an example of a

a. validity check.
b. field check.
c. zero-balance check.
d. completeness test.

A

b.field check.

56
Q

Identify the year the SEC will require American companies to switch from U.S.-based GAAP to IFRS as the basis for preparing financial statements.

a. 2026
b. 2028
c. 2030
d. At this point it is unclear when the SEC will require American companies to implement IFRS

A

d.At this point it is unclear when the SEC will require American companies to implement IFRS

57
Q

Which of the following balanced scorecard dimensions provides measures on how efficiently and effectively the organization is performing key business processes?

a. Financial.
b. Internal operations.
c. Innovation and learning.
d. Customer.

A

b.Internal operations.

58
Q

For a sales event, cardinalities can define:

a. The maximum number of customers that may be associated with a transaction.
b. The minimum number of customers that must be associated with a transaction.
c. Both of the above.
d. None of the above.

A

c.Both of the above.

59
Q

Which of the following statements about the REA data model is NOT true?

a. The REA data model was developed specifically for use in designing accounting information systems.
b. REA data models are usually depicted in the form of Data Flow Diagrams.
c. The REA model provides guidance for database design by identifying what entities should be included and by prescribing how to structure relationships among those entities.
d. The REA data model focuses on the business semantics underlying an organization’s value-chain activities.

A

b.REA data models are usually depicted in the form of Data Flow Diagrams.

60
Q

The essential feature(s) of the REA template include the following:

a. each event is linked to at least one resource that it affects.
b. each event is linked to at least one other event.
c. each event is linked to at least two participating agents.
d. All of the above.
e. None of the above.

A

d.All of the above.

61
Q

Developing an REA diagram for a specific transaction cycle requires which step(s)?

a. Identify the events about which management wants to collect information.
b. Determine the cardinalities of each relationship.
c. Both a. and b. are correct.
d. None of the above are correct.

A

c.Both a. and b. are correct.

62
Q

Which of the following is not a type of basic relationship between entities?

a. Many to many (M:N) relationship
b. One to many (1:N) relationship
c. One to one (1:1) relationship
d. One to two (1:2) relationship

A

d.One to two (1:2) relationship

63
Q

The REA model:

a. was designed specifically to assist the design of AIS.
b. identifies what entities should be in the AIS database.
c. prescribes structural relationships among entities in the database.
d. All of the above.

A

d.All of the above.

64
Q

Data modeling occurs at which stage of the database design process?a.Physical design

b. Conceptual design
c. Implementation
d. Operation

A

b.Conceptual design

65
Q

Which of the following statement(s) is TRUE?

a. An entity is anything about which the organization wants to collect and store information.
b. Events are the various business activities about which management wants to collect information for planning or control purposes.
c. E-R diagrams can be used to represent the contents of any kind of database.
d. All of the above are true.

A

d.All of the above are true.

66
Q

In order for a manufacturer to Get inventory, they must Give:

a. Cash
b. Raw materials
c. Machinery
d. B and C
e. A and C

A

B and C

67
Q

Which of the activities in a revenue cycle does not involve a Get or Give event?

a. Bill customers
b. Take customer orders
c. Fill customer orders
d. Collect payment from customers
e. B and C

A

e.B and C

68
Q

Identify the item below that would be classified as a resource by the REA data model.

a. An IOU from a customer.
b. The customer.
c. A customer sale.
d. A loan from a vendor.

A

a.An IOU from a customer.

69
Q

Every company can have more than one banking relationships, and each bank can have a business relationship with more than one company. Thus, the cardinality that exists between company and bank is a.one-to-one.

b. one-to-many.
c. many-to-many.
d. many-to-none.

A

c. many-to-many.

70
Q

An REA diagram must link every event to at least one ________ and two ________.

a. resource; agents
b. agent; resources
c. transaction; entities
d. resource; relationships

A

a.resource; agents

71
Q

The “give” event represents an activity which

a. includes a promise to engage in future economic exchanges. b.increases the organization’s stock of an economic resource.
c. reduces the organization’s stock of a resource that has economic value.
d. reduces the organization’s liabilities.

A

c. reduces the organization’s stock of a resource that has economic value.

72
Q

Each event in an REA model will in most cases have at least one ________ agent and one ________ agent involved with the event. a.internal; resource

b. external; entity
c. internal; employee
d. internal; external

A

d.internal; external

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