MULTIPLE CHOICE
1. Which statement is not correct? The audit trail in a computerized environment
a. consists of records that are stored sequentially in an audit file
b. traces transactions from their source to their final disposition
c. is a function of the quality and integrity of the application programs
d. may take the form of pointers, indexes, and embedded keys
2. All of the following are advantages of the test data technique except
a. auditors need minimal computer expertise to use this method
b. this method causes minimal disruption to the firm's operations
c. the test data is easily compiled
d. the auditor obtains explicit evidence concerning application functions
3. Which statement is not correct? The goal of batch controls is to ensure that during processing
a. transactions are not omitted
b. transactions are not added
c. transactions are free from clerical errors
d. an audit trail is created
4. Which input control check would detect a payment made to a nonexistent vendor?
a. missing data check
b. numeric/alphabetic check
c. range check
d. validity check
5. A computer operator was in a hurry and accidentally used the wrong master file to process a transaction file. As a result, the accounts receivable master file was erased. Which control would prevent this from happening?
a. header label check
b. expiration date check
c. version check
d. validity check
6. Which of the following is usually not part of an ERP's OLAP applications?
a. logistics
b. decision support systems
c. ad hoc analysis
d. what-if analysis
7. Which statement is true?
a. ERPs are infinitely scalable.
b. Performance problems usually stem from technical problems, not business process reengineering.
c. The better ERP can handle any problems an organization can have.
d. ERP systems can be modified using bolt-on software.
8. On-line transaction processing programs
a. are bolt-on programs used with commercially available ERSs.
b. are available in two models-two-tier and three-tier.
c. handle large numbers of relatively simple transactions.
d. allow users to analyze complex data relationships.
9. Separating the data warehouse from the operations databases occurs for all of the following reasons except
a. to make the management of the databases more economical
b. to increase the efficiency of data mining processes
c. to integrate legacy system data into a form that permits entity-wide analysis
d. to permit the integration of data from diverse sources
10. Which statement is most correct?
a. SAP is more suited to service industries than manufacturing clients.
b. J.D. Edwards's ERP is designed to accept the best practices modules of other vendors.
c. Oracle evolved from a human resources system.
d. PeopleSoft is the world's leading supplier of software for information management.
e. SoftBrands provides enterprise software for the hospitality and manufacturing sectors.
11. Copies of the sales order can be used for all of the following except
a. purchase order
b. credit authorization
c. shipping notice
d. packing slip
12. The billing department is not responsible for
a. updating the inventory subsidiary records
b. recording the sale in the sales journal
c. notifying accounts receivable of the sale
d. sending the invoice to the customer
13. The most effective internal control procedure to prevent or detect the creation of fictitious credit memoranda for sales returns is to
a. supervise the accounts receivable department
b. limit access to credit memoranda
c. prenumber and sequence check all credit memoranda
d. require management approval for all credit memoranda
14. Which control does not help to ensure that accurate records are kept of customer accounts and inventory?
a. reconcile accounts receivable control to accounts receivable subsidiary
b. authorize credit
c. segregate custody of inventory from record keeping
d. segregate record keeping duties of general ledger from accounts receivable
15. A weekly reconciliation of cash receipts would include comparing
a. the cash prelist with bank deposit slips
b. the cash prelist with remittance advices
c. bank deposit slips with remittance advices
d. journal vouchers from accounts receivable and general ledger
16. For an action to be called fraudulent, all of the following conditions are required except
a. poor judgment
b. false representation
c. intent to deceive
d. injury or loss
17. Which of the following controls would best prevent the lapping of accounts receivable?
a. Segregate duties so that the clerk responsible for recording in the accounts receivable subsidiary ledger has no access to the general ledger.
b. Request that customers review their monthly statements and report any unrecorded cash payments.
c. Require customers to send payments directly to the company's bank.
d. Request that customers make the check payable to the company.
18. A shell company fraud involves
a. stealing cash from an organization before it is recorded
b. Stealing cash from an organization after it has been recorded
c. manufacturing false purchase orders, receiving reports, and invoices
d. A clerk pays a vendor twice for the same products and cashes the reimbursement check issued by the vendor.
19. Which of the following is not an issue to be addressed in a business code of ethics required by the SEC?
a. Conflicts of interest
b. Full and Fair Disclosures
c. Legal Compliance
d. Internal Reporting of Code Violations
e. All of the above are issues to be addressed
20. What does the underlying assumption of reasonable assurance regarding implementation of internal control mean?
a. Auditor's are reasonably assured that fraud has not occurred in the period.
b. Auditor's are reasonably assured that employee carelessness can weaken an internal control structure.
c. Implementation of the control procedure should not have a significant adverse effect on efficiency or profitability.
d. Management assertions about control effectiveness should provide auditors with reasonable assurance.
21. Which statement is not correct? The VSAM structure
a. is used for very large files that need both direct access and batch processing.
b. may use an overflow area for records.
c. provides an exact physical address for each record.
d. is appropriate for files that require few insertions or deletions.
22. In a hierarchical model
a. links between related records are implicit
b. the way to access data is by following a predefined data path
c. an owner (parent) record may own just one member (child) record
d. a member (child) record may have more than one owner (parent)
23. The update anomaly in unnormalized databases
a. occurs because of data redundancy
b. complicates adding records to the database
c. may result in the loss of important data
d. often results in excessive record insertions
24. Which of the following is a relational algebra function?
a. restrict
b. project
c. join
d. all are relational algebra functions
25. A table is in first normal form when it is
a. free of repeating group data
b. free of transitive dependencies
c. free of partial dependencies
d. free of update anomalies
e. none of the above
26. The open purchase order file in the purchasing department is used to determine
a. the quality of items a vendor ships
b. the best vendor for a specific item
c. the orders that have not been received
d. the quantity of items received
27. The financial value of a purchase is determined by reviewing the
a. packing slip
b. purchase requisition
c. receiving report
d. supplier's invoice
28. Because of time delays between receiving inventory and making the journal entry
a. liabilities are usually understated
b. liabilities are usually overstated
c. liabilities are usually correctly stated
d. none of the above
29. To maintain a good credit rating and to optimize cash management, cash disbursements should arrive at the vendor's place of business
a. as soon as possible
b. on the due date
c. on the discount date
d. by the end of the month
30. In a firm with proper segregation of duties, adequate supervision is most critical in
a. purchasing
b. receiving
c. accounts payable
d. general ledger
SHORT ANSWER QUESTIONS
1. What are the three rules that ensure that no single employee or department processes a transaction in its entirety?
2. Before authorizing payment for goods purchased, accounts payable reconciles three documents related to the purchase. Name them and explain what each indicates. What control area of SAS 78 is being addressed?