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Chapter 1
—The Information
System: An Accountant’s Perspective
TRUE/FALSE
1.
Information is a business
resource.
ANS:
T
2.
An information system is an example of
a natural system.
ANS:
F
3.
Transaction processing systems convert
non-financial transactions into financial
transactions.
ANS:
F
4.
Information lacking reliability may
still have value.
ANS:
F
5.
A balance sheet prepared in conformity
with GAAP is an example of discretionary
reporting.
ANS:
F
6.
The Management Reporting System
provides the internal financial information needed
to manage a
business.
ANS:
T
7.
Most of the
inputs to the General Ledger System come from the
Financial Reporting System.
ANS:
F
8.
When
preparing discretionary reports, organizations can
choose what information to report and how to
present it.
ANS:
T
9.
Retrieval is the task of permanently
removing obsolete or redundant records from the
database.
ANS:
F
10.
Systems development represents 80 to 90
percent of the total cost of a computer
system.
ANS:
F
11.
The database administrator is
responsible for the security and integrity of the
database.
ANS:
T
12.
A backbone system is completely
finished, tested, and ready for
implementation.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
ANS:
F
The internal
auditor represents the interests of third-party
outsiders.
ANS:
F
Information
Technology (IT) audits can be performed by both
internal and external auditors.
ANS:
T
The single largest user of computer
services is the personnel function.
ANS:
F
Increased control is one of the key
advantages of distributed data
processing.
ANS:
F
The flat-file
approach is most often associated with so-called
legacy systems.
ANS:
T
In a flat-file
system, files are easily shared by
users.
ANS:
F
Legacy systems
were eliminated in the effort to make systems Y2K
compliant.
ANS:
F
One of the
greatest disadvantages of database systems is that
all data is always available to all
users.
ANS:
F
Under SOX
legislation auditors are no longer allowed to
provide consulting services to audit
clients.
ANS:
T
Under SOX
legislation auditors are no loger allowed to
provide consulting services to their
clients.
ANS:
F
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?
a.
raw
material
b.
labor
c.
information
d.
all are business resources
ANS:
D
2.
Which level
of management is responsible for short-term
planning and coordination of activities
necessary to accomplish organizational
objectives?
a.
operations
management
b.
middle
management
c.
top management
d.
line management
ANS:
B
3.
Which level of management is
responsible for controlling day-to-day operations?
a.
top management
b.
middle management
c.
operations management
d.
executive management
ANS:
C
4.
The ability to achieve the goals of a
system depends upon the effective functioning and
harmonious
interaction between its
subsystems. This is called
a.
system decomposition
b.
system redundancy
c.
backup system
d.
subsystem interdependency
ANS:
D
5.
The value of information for users is
determined by all of the following but
a.
reliability
b.
relevance
c.
convenience
d.
completeness
ANS:
C
6.
An example of a
nonfinancial transaction is
a.
sale of products
b.
cash disbursement
c.
log of customer calls
d.
purchase of inventory
ANS:
C
7.
An example of a financial transaction
is
a.
the purchase of
computer
b.
a supplier’s
price list
c.
a
delivery schedule
d.
an
employee benefit brochure
ANS:
A
8.
Which subsystem is not
part of the Accounting Information System?
a.
Transaction Processing
System
b.
Expert System
c.
General Ledger/Financial
Reporting System
d.
Management Reporting System
ANS:
B
9.
The major difference between the
Financial Reporting System (FRS) and the
Management Reporting
System (MRS) is
the
a.
FRS provides
information to internal and external users; the
MRS provides information to
internal
users
b.
FRS provides
discretionary information; the MRS provides
nondiscretionary information
c.
FRS reports are prepared using
information provided by the General Ledger System;
the
MRS provides information to the
General Ledger System
d.
FRS
reports are prepared in flexible, nonstandardized
formats; the MRS reports are
prepared
in standardized, formal formats
ANS:
A
10.
The purpose
of the Transaction Processing System includes all
of the following except
a.
converting economic events into
financial transactions
b.
recording financial transactions in the
accounting records
c.
distributing essential information to
operations personnel to support their daily
operations
d.
measuring and
reporting the status of financial resources and
the changes in those
resources
ANS:
D
11.
The Transaction Processing System
includes all of the following cycles except
a.
the revenue cycle
b.
the administrative cycle
c.
the expenditure cycle
d.
the conversion cycle
ANS:
B
12.
The primary input to the Transaction
Processing System is
a.
a
financial transaction
b.
an
accounting record
c.
an
accounting report
d.
a
nonfinancial transaction
ANS:
A
13.
When
designing the data collection activity, which type
of data should be avoided?
a.
data that is relevant
b.
data that is efficient
c.
data that is redundant
d.
data that is accurate
ANS:
C
14.
The most
basic element of useful data in the database is
a.
the record
b.
the key
c.
the
file
d.
the attribute
ANS:
D
15.
In a database, a complete set of
attributes for a single occurrence of an entity
class is called
a.
b.
c.
d.
a key
a file
a record
a
character
ANS:
C
16.
Effective information has all of the
following characteristics except
a.
relevance
b.
completeness
c.
summarization
d.
structure
ANS:
D
17.
Database management tasks do not
include
a.
summarization
b.
storage
c.
retrieval
d.
deletion
ANS:
A
18.
The author distinguishes between the
Accounting Information System and the management
Information System based on
a.
whether the transactions
are financial or nonfinancial
b.
whether discretionary or
nondiscretionary reports are prepared
c.
the end users of the
reports
d.
the
organizational structure of the business
ANS:
A
19.
Which activity is not part of the
finance function?
a.
cash
receipts
b.
portfolio
management
c.
credit
d.
general ledger
ANS:
D
20.
Market research and advertising are
part of which business function?
a.
materials management
b.
finance
c.
marketing
d.
production
ANS:
C
21.
Which function manages the financial
resources of the firm through portfolio
management, banking,
credit evaluation,
and cash receipts and disbursements?
a.
accounting
b.
finance
c.
materials management
d.
distribution
ANS:
B
22.
Which of the
following is not part of the accounting function?
a.
managing the financial
information resource of the firm
b.
capturing and recording transactions in
the database
c.
distributing
transaction information to operations personnel
d.
managing the physical
information system of the firm
ANS:
D
23.
The term
“accounting independence” refers to
a.
data integrity
b.
separation of duties,
such as record keeping and custody of physical
resources
c.
generation of
accurate and timely information
d.
business segmentation by function
ANS:
B
24.
In the distributed data processing
approach
a.
computer
services are consolidated and managed as a shared
organization resource
b.
the
computer service function is a cost center
c.
the end users are billed
using a charge-back system
d.
computer services are organized into
small information processing units under the
control
of end users
ANS:
D
25.
The data
control group is responsible for
a.
performing the day-to-day processing of
transactions
b.
security and
integrity of the database
c.
liaison between the end user and data
processing
d.
providing safe
storage for off-line data files
ANS:
C
26.
Data
processing does
not
involve
a.
data control
b.
computer operations
c.
system maintenance
d.
data conversion
ANS:
C
27.
Independent auditing is performed by
a.
external auditors
b.
internal accountants
c.
licensed auditors
d.
third-party accountants
ANS:
A
28.
Which individual is least involved in
new systems development?
a.
systems analyst
b.
external auditor
c.
end user
d.
data
librarian
ANS:
D
29.
The objectives of all information
systems include all of the following except
a.
support for the
stewardship function of management
b.
evaluating transaction data
c.
support for the day-to-
day operations of the firm
d.
support for management decision making
ANS:
B
30.
Which individuals may be involved in
the Systems Development Life Cycle?
a.
accountants
b.
systems professionals
c.
end users
d.
all
of the above
ANS:
D
31.
An appraisal function housed within the
organization that performs a wide range of
services for
management is
a.
internal auditing
b.
data control group
c.
external auditing
d.
database administration
ANS:
A
32.
Advantages of a database system include
all of the following except
a.
elimination of data redundancy
b.
open access to all data
by all users
c.
single
update for changes in data
d.
confidence that all data is current
ANS:
B
33.
Disadvantages of distributed data
processing include all of the following except
a.
mismanagement of
organizationwide resources
b.
hardware and software incompatibility
c.
cost reductions
d.
difficulty in hiring
qualified IT professionals
ANS:
C
34.
Advantages
of distributed data processing include each of the
following except
a.
cost
reductions
b.
better
management of organization resources
c.
improved operational efficiency
d.
increased user
satisfaction
ANS:
B
35.
Disadvantages of the distributed data
processing approach include all of the following
except
a.
possible
mismanagement of organization resources
b.
redundancy of tasks
c.
software incompatibility
d.
system is not responsive
to the user’s situation
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