Far Eastern University

ACC 101

Chapter 1-The Information System: An Accountants Perspective

TRUE/FALSE

1)Information is a business resource.

2. An information system is an example of a natural system.

3. Transaction processing systems convert non-financial transactions into financial transactions.

4. Information lacking reliability may still have value.

5. A balance sheet prepared in conformity with GAAP is an example of discretionary reporting.

6. The Management Reporting System provides the internal financial information needed to manage a business.

7. Most of the inputs to the General Ledger System come from the Financial Reporting System.

8. When preparing discretionary reports, organizations can choose what information to report and how to present it.

9. Retrieval is the task of permanently removing obsolete or redundant records from the database.

10. Systems development represents 80 to 90 percent of the total cost of a computer system.

11. The database administrator is responsible for the security and integrity of the database.

12. A backbone system is completely finished, tested, and ready for implementation.

13. The internal auditor represents the interests of third-party outsiders.

14. Information Technology (IT) audits can be performed by both internal and external auditors.

15. The single largest user of computer services is the personnel function.

16. Increased control is one of the key advantages of distributed data processing.

17. The flat-file approach is most often associated with so-called legacy systems.

18. In a flat-file system, files are easily shared by users.

19. Legacy systems were eliminated in the effort to make systems Y2K compliant.

20. One of the greatest disadvantages of database systems is that all data is always available to all users.

21. Under SOX legislation auditors are no longer allowed to provide consulting services to audit clients.

22. Under SOX legislation auditors are no loger allowed to provide consulting services to their clients.

They cannot provide such services to audit clients but may still provide them to non-audit clients

MULTIPLE CHOICE

1. Which of the following is not a business resource?

1. raw material
2. labor
3. information
4. all are business resources

2. Which level of management is responsible for short-term planning and coordination of activities necessary to accomplish organizational objectives?

1. operations management
2. middle management
3. top management
4. line management

3. Which level of management is responsible for controlling day-to-day operations?

1. top management
2. middle management
3. operations management
4. executive management

4. The ability to achieve the goals of a system depends upon the effective functioning and harmonious interaction between its subsystems. This is called

1. system decomposition
2. system redundancy
3. backup system
4. subsystem interdependency

5. The value of information for users is determined by all of the following but

1. reliability
2. relevance
3. convenience
4. completeness

6. An example of a nonfinancial transaction is

1. sale of products
2. cash disbursement
3. log of customer calls
4. purchase of inventory

7. An example of a financial transaction is

1. the purchase of computer
2. a supplier’s price list
3. a delivery schedule
4. an employee benefit brochure

8. Which subsystem is not part of the Accounting Information System?

1. Transaction Processing System
2. Expert System

3. General Ledger/Financial Reporting System
4. Management Reporting System

9. The major difference between the Financial Reporting System (FRS) and the Management Reporting System (MRS) is the

1. FRS provides information to internal and external users; the MRS provides information to internal users
2. FRS provides discretionary information; the MRS provides nondiscretionary information
3. FRS reports are prepared using information provided by the General Ledger System; the MRS provides information to the General Ledger System
4. FRS reports are prepared in flexible, nonstandardized formats; the MRS reports are prepared in standardized, formal formats

10. The purpose of the Transaction Processing System includes all of the following except

1. converting economic events into financial transactions
2. recording financial transactions in the accounting records
3. distributing essential information to operations personnel to support their daily operations
4. measuring and reporting the status of financial resources and the changes in those resources

11. The Transaction Processing System includes all of the following cycles except

1. the revenue cycle
2. the administrative cycle
3. the expenditure cycle
4. the conversion cycle

12. The primary input to the Transaction Processing System is

1. a financial transaction
2. an accounting record
3. an accounting report
4. a nonfinancial transaction

13. When designing the data collection activity, which type of data should be avoided?

1. data that is relevant
2. data that is efficient
3. data that is redundant
4. data that is accurate

14. The most basic element of useful data in the database is

1. the record
2. the key
3. the file
4. the attribute

15. In a database, a complete set of attributes for a single occurrence of an entity class is called

1. a key
2. a file
3. a record
4. a character

16. Effective information has all of the following characteristics except

1. relevance
2. completeness
3. summarization
4. structure

17. Database management tasks do not include

1. summarization
2. storage
3. retrieval
4. deletion

18. The author distinguishes between the Accounting Information System and the management Information System based on

1. whether the transactions are financial or nonfinancial
2. whether discretionary or nondiscretionary reports are prepared
3. the end users of the reports
4. the organizational structure of the business

19. Which activity is not part of the finance function?

1. cash receipts
2. portfolio management
3. credit
4. general ledger

20. Market research and advertising are part of which business function?

1. materials management
2. finance
3. marketing
4. production

21. Which function manages the financial resources of the firm through portfolio management, banking, credit evaluation, and cash receipts and disbursements?

1. accounting
2. finance
3. materials management

4. distribution

22. Which of the following is not part of the accounting function?

1. managing the financial information resource of the firm
2. capturing and recording transactions in the database
3. distributing transaction information to operations personnel
4. managing the physical information system of the firm

23. The term “accounting independence” refers to

1. data integrity
2. separation of duties, such as record keeping and custody of physical resources
3. generation of accurate and timely information
4. business segmentation by function

24. In the distributed data processing approach

1. computer services are consolidated and managed as a shared organization resource
2. the computer service function is a cost center
3. the end users are billed using a charge-back system
4. computer services are organized into small information processing units under the control of end users

25. The data control group is responsible for

1. performing the day-to-day processing of transactions
2. security and integrity of the database
3. liaison between the end user and data processing
4. providing safe storage for off-line data files

26. Data processing does not involve

1. data control
2. computer operations
3. system maintenance
4. data conversion

27. Independent auditing is performed by

1. external auditors
2. internal accountants
3. licensed auditors
4. third-party accountants

28. Which individual is least involved in new systems development?

1. systems analyst
2. external auditor

3. end user
4. data librarian

29. The objectives of all information systems include all of the following except

1. support for the stewardship function of management
2. evaluating transaction data
3. support for the day-to-day operations of the firm
4. support for management decision making

30. Which individuals may be involved in the Systems Development Life Cycle?

1. accountants
2. systems professionals
3. end users
4. all of the above

31. An appraisal function housed within the organization that performs a wide range of services for management is

1. internal auditing
2. data control group
3. external auditing
4. database administration

32. Advantages of a database system include all of the following except

1. elimination of data redundancy
2. open access to all data by all users
3. single update for changes in data
4. confidence that all data is current

33. Disadvantages of distributed data processing include all of the following except

1. mismanagement of organizationwide resources
2. hardware and software incompatibility
3. cost reductions
4. difficulty in hiring qualified IT professionals

34. Advantages of distributed data processing include each of the following except

1. cost reductions
2. better management of organization resources
3. improved operational efficiency
4. increased user satisfaction

35. Disadvantages of the distributed data processing approach include all of the following except

1. possible mismanagement of organization resources

2. redundancy of tasks
3. software incompatibility
4. system is not responsive to the user’s situation

36. ERP packages include all of the following modules except

1. human resources
2. general ledger
3. inventory management
4. they include all of the above

37. All of the following are external end users except

1. cost accountants
2. creditors
3. stockholders
4. tax authorities

38. Useful information must possess all of the following characteristics except

1. relevance
2. timelessness
3. accuracy
4. completeness

39. The objectives of an information system include each of the following except

1. support for the stewardship responsibilities of management
2. furthering the financial interests of shareholders
3. support for management decision making
4. support for the firm’s day-to-day operations

40. Accountants play many roles relating to the accounting information system, including all of the following except

1. system users
2. system designers
3. system auditors
4. system converters

SHORT ANSWER

1. Entities outside the organization with a direct or indirect interest in the firm, such as stockholders, financial institutions, and government agencies, are called                                                                          .

2. The process of breaking a system into smaller subsystem parts is called

                                                                          .

3. Transactions with trading partners include                                                 and

                                                 .

4. A system is a group of two or more interrelated components that

                                                                                      .

5. The task of locating and transferring an existing record from the database for processing is called data       .

6. Three ways that a business can be divided into segments are by

                                                                ,                                                                  and by

                                                                .

7. Three activities that are part of the finance function are                                                            ,

                                                                , and                                                                .

8. Two distinct ways to structure the Data Processing Department are                                             

and                                                  .

9. Two methods to acquire information systems are to                                                             and to

                                                                .

10. Audits are conducted by                                                 ,                                                  , and

                                                  auditors.

11. Sales of products to customers, purchases of inventory from vendors, and cash disbursements

are all example of                                                                .

12. The three major subsystems of the AIS are                                                                          ,

                                                                  , and                                                                            .

13. The                                                                  and                                                                 standards that characterize the AIS clearly distinguish it from the MIS.

14. The transaction processing system is comprised of three cycles:

                                                                ,                                                                 , and

                                                                .

15. The REA model identifies an organization’s                                                  ,

                                                 , and                                                  .

16. Sarbanes-Oxley legislation requires that management designs and implements controls over the entire financial reporting process. What systems does this include?

17. Why is it necessary to distinguish between AIS and MIS?

18. How has SOX legislation impacted the consulting practices of public accounting firms?

19. What is discretionary reporting?

20. Name the five characteristics of information?

ESSAY

1. Contrast the responsibilities of operations management, middle management, and top management. Explain the different information needs for each level of management.

2. Explain the difference between data and information.

3. Why do accountants need to understand the organizational structure of the business?

4. Several disadvantages of distributed data processing have been discussed. Discuss at least three.

5. Name and explain the purpose of the three major subsystems of the AIS:

6. What are the three primary functions performed by the transaction processing system?

7. The most commonly stated benefits of DDP are cost savings, increased user satisfaction, and improved operational efficiency. Explain.

8. Data redundancy is described as a problem in flat-file systems due to data storage, updating, and currency issues. Explain.

9. Explain the elements of the REA model and give an example of each.