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Accounting
Information Systems, 12e (Romney/Steinbart)
Chapter
1 Accounting Information Systems: An
Overview
1)
Which of the following statements below shows the contrast between data and
information?
A)
Data is the output of an AIS.
B)
Information is the primary output of an AIS.
C)
Data is more useful in decision-making than information.
D)
Data and information are the same.
Answer: B
Page
Ref: 4
Objective: Learning Objective 1
Difficulty
: Easy
AACSB: Analytic
2)
Information is
A)
basically the same as data.
B)
raw facts about transactions.
C)
potentially useful facts when processed in a timely manner.
D)
data that has been organized and processed so that it's meaningful.
Answer: D
Page
Ref: 4
Objective: Learning Objective 1
Difficulty
: Easy
AACSB: Analytic
3)
The value of information can best be defined as
A)
how useful it is to decision makers.
B)
the benefits produced by possessing and using the information minus the cost of
producing it.
C)
how relevant it is.
D)
the extent to which it maximizes the value chain.
Answer: B
Page
Ref: 4
Objective: Learning Objective 1
Difficulty
: Moderate
AACSB:
Analytic
4)
An accounting information system (AIS) processes ________ to provide users with
________.
A)
data; information
B)
data; transactions
C)
information; data
D)
data; benefits
Answer: A
Page
Ref: 10
Objective: Learning Objective 1
Difficulty
: Easy
AACSB: Analytic
5)
Information that reduces uncertainty, improves decision makers' ability to make
predictions, or confirms or corrects their prior expectations, is said to be
A)
complete.
B)
relevant.
C)
reliable.
D)
timely.
Answer: B
Page
Ref: 5
Objective: Learning Objective 1
Difficulty
: Easy
AACSB: Analytic
6)
Information that is free from error or bias and accurately represents the
events or activities of the organization is
A)
relevant.
B)
reliable.
C)
verifiable.
D)
timely.
Answer: B
Page
Ref: 5
Objective: Learning Objective 1
Difficulty
: Easy
AACSB:
Analytic
7)
Information that does not omit important aspects of the underlying events or
activities that it measures is
A)
complete.
B)
accessible.
C)
relevant.
D)
timely.
Answer: A
Page
Ref: 5
Objective: Learning Objective 1
Difficulty
: Easy
AACSB: Analytic
8)
When two knowledgeable people acting independently each produce the same
information, this information is said to be
A)
complete.
B)
relevant.
C)
reliable.
D)
verifiable.
Answer: D
Page
Ref: 5
Objective: Learning Objective 1
Difficulty
: Easy
AACSB: Analytic
9)
Data must be converted into information to be considered useful and meaningful
for decision-making. There are six characteristics that make information both
useful and meaningful. If information is free from error or bias and accurately
represents the events or activities of the organization, it is representative
of the characteristic of
A)
relevancy.
B)
timeliness.
C)
understandability.
D)
reliability.
Answer: D
Page
Ref: 5
Objective: Learning Objective 1
Difficulty
: Easy
AACSB:
Analytic
10)
An accounting information system must be able to perform which of the following
tasks?
A)
collect transaction data
B)
process transaction data
C)
provide adequate controls
D)
all of the above
Answer: D
Page
Ref: 10
Objective: Learning Objective 5
Difficulty
: Easy
AACSB: Analytic
11)
Which of the following is not an example of a common activity in an AIS?
A)
buy and pay for goods and services
B)
sell goods and services and collect cash
C)
summarize and report results to interested parties
D)
recording of sales calls for marketing purposes
Answer: D
Page
Ref: 8
Objective: Learning Objective 5
Difficulty
: Easy
AACSB: Analytic
12)
Which of the following is not one of the components of an AIS?
A)
Internal controls and security measures
B)
People
C)
Procedures and instructions
D)
Hardware
Answer: D
Page
Ref: 10
Objective: Learning Objective 5
Difficulty
: Easy
AACSB: Analytic
13)
One group that relies on both the adequate collection and transformation of
data for decision-making purposes for an organization is
A)
management.
B)
interested outsiders.
C)
competitors.
D)
the government.
Answer: A
Page
Ref: 12
Objective: Learning Objective 3
Difficulty
: Easy
AACSB:
Analytic
14)
The primary objective of accounting is to
A)
implement strong internal controls.
B)
provide useful information to decision makers.
C)
prepare financial statements.
D)
ensure the profitability of an organization.
Answer: B
Page
Ref: 12
Objective: Learning Objective 5
Difficulty
: Moderate
AACSB: Analytic
15)
The American Institute of Certified Public Accountants (AICPA) has recognized
the importance of AIS and the major impact information technology has on the
area of accounting. To recognize individual CPAs who have met educational and
experiential requirements in this area, the group formally created the
designation known as
A)
the Certified Management Accountant.
B)
the Certified Information Technology Professional.
C)
the Certified Internal Auditor.
D)
the Certified Data Processing Professional.
Answer: B
Page
Ref: 11
Objective: Learning Objective 6
Difficulty
: Moderate
AACSB: Analytic
16)
The AIS must include controls to ensure
A)
safety and availability of data.
B)
marketing initiatives match corporate goals.
C)
information produced from data is accurate.
D)
both A and C
Answer: D
Page
Ref: 10
Objective: Learning Objective 6
Difficulty
: Easy
AACSB:
Analytic
17)
A change in the AIS that makes information more easily accessible and widely
available within an organization is most likely to first influence the
A)
organizational culture.
B)
customer base.
C)
external financial statement users.
D)
production activity.
Answer: A
Page
Ref: 13
Objective: Learning Objective 7
Difficulty
: Easy
AACSB: Analytic
18)
The process of creating value for customers is the result of nine activities
that form a
A)
value chain.
B)
profitable operation.
C)
successful business.
D)
support system.
Answer: A
Page
Ref: 13
Objective: Learning Objective 8
Difficulty
: Easy
AACSB: Analytic
19)
The value chain concept is composed of two types of activities known as
A)
primary and support.
B)
primary and secondary.
C)
support and value.
D)
technology and support.
Answer: A
Page
Ref: 13-14
Objective: Learning Objective 8
Difficulty
: Moderate
AACSB: Analytic
20)
Which of the following is a primary activity in the value chain?
A)
infrastructure
B)
technology
C)
purchasing
D)
marketing and sales
Answer: D
Page
Ref: 14
Objective: Learning Objective 8
Difficulty
: Easy
AACSB:
Analytic
21)
In value chain analysis, what is the activity of arranging the delivery of
products to customers called?
A)
outbound logistics
B)
inbound logistics
C)
shipping
D)
delivery
Answer: A
Page
Ref: 14
Objective: Learning Objective 8
Difficulty
: Moderate
AACSB: Analytic
22)
An AIS provides value by
A)
improving products or services through information that increases quality and
reduces costs.
B)
providing timely and reliable information to decision makers.
C)
creating new products.
D)
both A and B
Answer: D
Page
Ref: 11
Objective: Learning Objective 6
Difficulty
: Easy
AACSB: Analytic
23)
In Chapter 1, Figure 1-4 shows the factors that influence the design of AIS.
The diagram shows a bi-directional arrow between the organizational culture and
the AIS. The reason for this two-way interchange between organizational culture
and AIS is
A)
that the AIS should not influence the values of the organizational culture.
B)
because the organization's culture influences the AIS, and likewise the AIS
influences the organization's culture by controlling the flow of information
within the organization.
C)
due to the transfer of managers between the two corporate elements.
D)
the AIS impacts the organization's key strategies.
Answer: B
Page
Ref: 13
Objective: Learning Objective 7
Difficulty
: Easy
AACSB:
Analytic
24)
An example of inbound logistics would consist of
A)
the activities that transform inputs into final products or services.
B)
the activities that help customers to buy the organization's products or
services.
C)
the activities that provide post-sale support to customers.
D)
the activities that consist of receiving, storing, and distributing the
materials used as inputs by the organization to create goods and/or services it
sells.
Answer: D
Page
Ref: 13
Objective: Learning Objective 8
Difficulty
: Easy
AACSB: Analytic
25)
A good example of how an AIS is used to share knowledge within an organization
is
A)
the use of a corporate database to help staff identify the relevant experts who
can help with a particular client.
B)
the use of laptop computers to access a network for messaging worldwide.
C)
the monitoring of production equipment to watch for defects.
D)
the use of point-of-sale data to determine hot-selling items.
Answer: A
Page
Ref: 11
Objective: Learning Objective 6
Difficulty
: Moderate
AACSB: Analytic
26)
One activity within the value chain is research and development. This activity
can be identified as a
A)
firm infrastructure activity.
B)
human resources activity.
C)
technology activity.
D)
purchasing activity.
Answer: C
Page
Ref: 14
Objective: Learning Objective 8
Difficulty
: Moderate
AACSB:
Analytic
27)
When the AIS provides information in a timely and accurate manner, it stands as
an example of
A)
improved decision making.
B)
improving the quality and reducing the costs of products or services.
C)
improving efficiency.
D)
all of the above
Answer: D
Page
Ref: 11
Objective: Learning Objective 6
Difficulty
: Easy
AACSB: Analytic
28)
Accounting information plays major roles in managerial decision making by
A)
identifying situations requiring management action.
B)
reducing uncertainty.
C)
providing a basis for choosing among alternative actions.
D)
all of the above
Answer: D
Page
Ref: 12
Objective: Learning Objective 6
Difficulty
: Easy
AACSB: Analytic
29)
A well-designed AIS can improve the decision-making function within the
organization. Which statement below would describe a limitation, rather than a
benefit, of an efficient AIS?
A)
An AIS reduces uncertainty, and therefore accounting information can provide a
basis for choosing among alternative courses of action.
B)
An AIS identifies situations requiring management action.
C)
An AIS provides to its users an abundance of information without any filtering
or condensing of such information.
D)
An AIS provides information about the results of previous decisions which
provides decision makers with feedback that can be used in future decision
making.
Answer: C
Page
Ref: 12
Objective: Learning Objective 6
Difficulty
: Easy
AACSB:
Analytic
30) Jill Fredson
is in charge of the mail room at Gammon University. Every Friday morning she
receives a report via email that summarizes the number of outgoing and incoming
pieces of mail by source and destination department. Every Friday afternoon,
Jill deletes the report without reading it because it has no bearing on mail
room operations. Which of the following characteristics of useful information
is absent in the situation described above?
A) Relevant
B) Reliable
C) Complete
D) Timely
E)
Understandable
F) Verifiable
G) Accessible
Answer: A
Page
Ref: 5
Objective: Learning Objective 1
Difficulty
: Moderate
AACSB: Analytic
31) Inventory
information is provided in real time by a firm's accounting information system.
The accuracy of this information is questionable, however, since the production
manager often reports stock outs of components that the system indicates are in
stock. Which of the following characteristics of useful information is absent
in the situation described above?
A) Relevant
B) Reliable
C) Complete
D) Timely
E)
Understandable
F) Verifiable
G) Accessible
Answer: B
Page
Ref: 5
Objective: Learning Objective 1
Difficulty
: Moderate
AACSB:
Analytic
32) Joe Marzetti
has been the controller of Fairview Tires for 25 years. Ownership of the firm
recently changed hands and the new owners are conducting an audit of the
financial records. The audit has been unable to reproduce financial reports
that were prepared by Marzetti. While there is no evidence of wrongdoing, the
auditors are concerned that the discrepancies might contribute to poor
decisions. Which of the following characteristics of useful information is
absent in the situation described above?
A) Relevant
B) Reliable
C) Complete
D) Timely
E)
Understandable
F) Verifiable
G) Accessible
Answer: F
Page
Ref: 5
Objective: Learning Objective 1
Difficulty
: Moderate
AACSB: Analytic
33) In 2003,
Custer Manufacturing implemented a Web-based information system that allows all
employees to access mission-critical information. The intention was to increase
production efficiency. Unfortunately, it had the opposite effect, as deliveries
fell behind schedule and costs increased. Jeff Akspen, the director of
information technology services, asked Joyce Jenkins to come in and talk with
him about the system. Joyce is a long-time employee of Custer, and her opinion
is valued by her peers and by her supervisor. "So Joyce, how's it going
down there in the shop?""Not so good, Jeff. Used to be we got a
weekly pick list so we knew how to plan production. Now, we got that computer
system. Most of us can't figure out how to use it to do our jobs. Is there some
way to print out a pick list?"Jeff thought for a while before responding.
"Well, Joyce, to tell you the truth, I'm not so sure how to do it myself,
but there must be a way. We'll bring in the consultants that helped us build
the system. Maybe they can help." Which of the following characteristics
of useful information is absent in the situation described above?
A) Relevant
B) Reliable
C) Complete
D) Timely
E)
Understandable
F) Verifiable
G) Accessible
Answer: E
Page
Ref: 5
Objective: Learning Objective 1
Difficulty
: Moderate
AACSB:
Analytic
34) Razzmataz,
Wisconsin, is a popular tourist destination. During the winter months, the
population dwindles to a meager few, but when summer comes, the size of the
town surges. Chuck Hewitt is the town sanitation engineer. When the size of the
town surges, so do his responsibilities. Among them is management of the sewage
processing volume.In an interview with the local paper, Chuck complained that a
report on tourist population that he uses to adjust processing volume refers to
data that was collected five days ago and it takes him a week to make
adjustments.Which of the following characteristics of useful information is
absent in the situation described above?
A) Relevant
B) Reliable
C) Complete
D) Timely
E)
Understandable
F) Verifiable
G) Accessible
Answer: D
Page
Ref: 5
Objective: Learning Objective 1
Difficulty
: Moderate
AACSB: Analytic
35) A frantic
Stro Frinzel called the home office from Des Moines."You have got to help
me. I am about to close a great sale, but I have to be able to guarantee
delivery by the fourteenth. I can't get through to the company Web site to
verify delivery!""Thank you for calling. Your call is very important
to us. However, all of our lines are currently in use. Please try again
later."Which of the following characteristics of useful information is
absent in the situation described above?
A) Relevant
B) Reliable
C) Complete
D) Timely
E)
Understandable
F) Verifiable
G) Accessible
Answer: G
Page
Ref: 5
Objective: Learning Objective 1
Difficulty
: Easy
AACSB:
Analytic
36) Message left
on an answering machine: "Hi Bob! Just got into town. How about dinner
this evening if you're available. Call me!"Which of the following
characteristics of useful information is absent in the situation described
above?
A) Relevant
B) Reliable
C) Complete
D) Timely
E)
Understandable
F) Verifiable
G) Accessible
Answer: C
Page
Ref: 5
Objective: Learning Objective 1
Difficulty
: Moderate
AACSB: Analytic
37) Robinson
Crusoe has formed a business that sells carved gourmet coconuts. He has hired
five employees. The most senior is Friday, who manages the carving process.
Monday is the newest employee. She collects the coconuts. Tuesday, as you might
expect, takes calls from curstomers, oops, I mean customers, who are unhappy
with their coconuts. Wednesday tosses finished coconuts into the sea, whereupon
they drift to the wholesaler. Thursday sends smoke signals to the wholesaler
extolling the virtues of the latest production run of nuts that are drifting
across the bay.Which of the following functions in the value chain is Monday
performing?
A) Inbound
logistics
B) Operations
C) Outbound
logistics
D) Marketing and
sales
E) Service
Answer: A
Page
Ref: 13
Objective: Learning Objective 8
Difficulty
: Moderate
AACSB:
Analytic
38) Robinson
Crusoe has formed a business that sells carved gourmet coconuts. He has hired
five employees. The most senior is Friday, who manages the carving process.
Monday is the newest employee. She collects the coconuts. Tuesday, as you might
expect, takes calls from curstomers, oops, I mean customers, who are unhappy
with their coconuts. Wednesday tosses finished coconuts into the sea, whereupon
they drift to the wholesaler. Thursday sends smoke signals to the wholesaler
extolling the virtues of the latest production run of nuts that are drifting
across the bay.Which of the following functions in the value chain is Friday
performing?
A) Inbound
logistics
B) Operations
C) Outbound
logistics
D) Marketing and
sales
E) Service
Answer: B
Page
Ref: 13
Objective: Learning Objective 8
Difficulty
: Moderate
AACSB: Analytic
39) Robinson
Crusoe has formed a business that sells carved gourmet coconuts. He has hired
five employees. The most senior is Friday, who manages the carving process.
Monday is the newest employee. She collects the coconuts. Tuesday, as you might
expect, takes calls from curstomers, oops, I mean customers, who are unhappy
with their coconuts. Wednesday tosses finished coconuts into the sea, whereupon
they drift to the wholesaler. Thursday sends smoke signals to the wholesaler
extolling the virtues of the latest production run of nuts that are drifting
across the bay.Which of the following functions in the value chain is Wednesday
performing?
A) Inbound
logistics
B) Operations
C) Outbound
logistics
D) Marketing and
sales
E) Service
Answer: C
Page
Ref: 14
Objective: Learning Objective 8
Difficulty
: Moderate
AACSB:
Analytic
40) Robinson
Crusoe has formed a business that sells carved gourmet coconuts. He has hired
five employees. The most senior is Friday, who manages the carving process.
Monday is the newest employee. She collects the coconuts. Tuesday, as you might
expect, takes calls from curstomers, oops, I mean customers, who are unhappy
with their coconuts. Wednesday tosses finished coconuts into the sea, whereupon
they drift to the wholesaler. Thursday sends smoke signals to the wholesaler
extolling the virtues of the latest production run of nuts that are drifting
across the bay.Which of the following functions in the value chain is Thursday
performing?
A) Inbound
logistics
B) Operations
C) Outbound
logistics
D) Marketing and
sales
E) Service
Answer: D
Page
Ref: 14
Objective: Learning Objective 8
Difficulty
: Easy
AACSB: Analytic
41) Robinson
Crusoe has formed a business that sells carved gourmet coconuts. He has hired
five employees. The most senior is Friday, who manages the carving process.
Monday is the newest employee. She collects the coconuts. Tuesday, as you might
expect, takes calls from curstomers, oops, I mean customers, who are unhappy
with their coconuts. Wednesday tosses finished coconuts into the sea, whereupon
they drift to the wholesaler. Thursday sends smoke signals to the wholesaler
extolling the virtues of the latest production run of nuts that are drifting
across the bay.Which of the following functions in the value chain is Tuesday
performing?
A) Inbound
logistics
B) Operations
C) Outbound
logistics
D) Marketing and
sales
E) Service
Answer: E
Page
Ref: 14
Objective: Learning Objective 8
Difficulty
: Moderate
AACSB:
Analytic
42)
Refer to the
chart above. At what point, measured in terms of the net cost of information,
does information overload begin?
A) 0
B) 5
C) 10
D)
12
Answer: C
Page
Ref: 4
Objective: Learning Objective 1
Difficulty
: Easy
AACSB:
Analytic
43)
Tri-Anything, Limited, is a British company operating in New York state. It
offers stylized, boutique public relations services to upscale retailers in
quaint New England towns. A major source of revenue is a weekly newsletter that
reports on current and projected tourist travel and spending patterns.
Preparation of the newsletter requires study and analysis of weather
conditions, economic activity, and travel costs. It is available at an annual
subscription rate of $299.99. There are currently 190 subscribers. Preparation
and distribution of the newsletter costs $12,000 annually. The value of information
to subscribers is:
A) $236.83
B) $44,998.10
C) Less than
$63.16
D)
At least $300.00
Answer: D
Page
Ref: 4
Objective: Learning Objective 1
Difficulty
: Easy
AACSB: Analytic
44)
Many modern accounting software packages offer separate transaction cycle
modules. What is the reason for this?
A)
Every organization does not need to implement all of the available transaction
cycle modules.
B)
Most businesses do not need the revenue cycle module as part of their AIS.
C)
The nature of a given transaction cycle is the same irrespective of the type of
organization.
D)
A properly designed AIS does not use the concept of separate business
transaction cycles to process transactions.
Answer: A
Page
Ref: 9
Objective: Learning Objective 5
Difficulty
: Moderate
AACSB: Analytic
45)
The business owners obtain financing from outside investors, which results in
an inflow of cash into the company. This transaction is considered to be part
of which cycle?
A)
the revenue cycle
B)
the payroll cycle
C)
the production cycle
D)
the financing cycle
Answer: D
Page
Ref: 7-8
Objective: Learning Objective 4
Difficulty
: Easy
AACSB:
Analytic
46)
Which of the following is not a transaction cycle?
A)
revenue
B)
expenditure
C)
human resources
D)
general ledger and reporting
Answer: D
Page
Ref: 7-9
Objective: Learning Objective 4
Difficulty
: Moderate
AACSB: Analytic
47)
Which of the following statements is false?
A)
Retail stores do not have a production cycle.
B)
Financial institutions have installment-loan cycles.
C)
A service company does not have an inventory system.
D)
Every organization should implement every transaction cycle module.
Answer: D
Page
Ref: 9
Objective: Learning Objective 4
Difficulty
: Easy
AACSB: Analytic
48)
Transaction cycles can be summarized on a high level as "give-get"
transactions. An example of "give-get" in the expenditure cycle would
be
A)
give cash, get cash.
B)
give cash, get goods.
C)
give cash, get labor.
D)
give goods, get cash.
Answer: B
Page
Ref: 7
Objective: Learning Objective 4
Difficulty
: Easy
AACSB: Analytic
49)
Transaction cycles can be summarized on a high level as "give-get"
transactions. An example of "give-get" in the revenue cycle would be
A)
give cash, get goods.
B)
give goods, get cash.
C)
give cash, get labor.
D)
give cash, get cash.
Answer: B
Page
Ref: 7
Objective: Learning Objective 4
Difficulty
: Easy
AACSB:
Analytic
50)
Groups of related business activities such as the acquisition of merchandise
and payment of vendors are called
A)
transaction cycles.
B)
economic cycles.
C)
business events.
D)
transactions.
Answer: A
Page
Ref: 6-7
Objective: Learning Objective 4
Difficulty
: Easy
AACSB: Analytic
51)
Which of the following is a true statement?
A)
Business strategy directly influences AIS, but not information technology.
B)
Information technology directly influences organizational culture, but not
business strategy.
C)
Organizational culture directly influences business strategy, but not AIS.
D)
AIS directly influences information technology, but not business strategy.
Answer: A
Page
Ref: 13
Objective: Learning Objective 7
Difficulty
: Difficult
AACSB: Analytic
52)
The transaction cycle that includes the events of hiring employees and paying
them is known as the
A)
revenue cycle.
B)
expenditure cycle.
C)
human resources cycle.
D)
financing cycle.
Answer: C
Page
Ref: 7-8
Objective: Learning Objective 4
Difficulty
: Easy
AACSB:
Analytic
53)
The transaction cycle approach leads to efficient processing of a large number
of transactions because
A)
transaction cycles are easier to computerize.
B)
a large number of transactions within a given cycle can be categorized into a
relatively small number of distinct types.
C)
the transaction cycle approach represents the natural order of business.
D)
transaction cycles are easy to understand.
Answer: B
Page
Ref: 7
Objective: Learning Objective 4
Difficulty
: Moderate
AACSB: Analytic
54)
Which of the following is not an example of how an AIS adds value to an
organization?
A)
All employees at a hospital can access and update patient records from any
computer terminal in the hospital.
B)
A customer service representative can find a customer's account data, purchase
history, payment history, and salesperson's name while on the phone with the
customer, to resolve issues quickly.
C)
Suppliers are able to access sales data directly from the point-of-sale system
of a retailer and deliver inventory automatically when needed.
D)
Client tax files are encrypted and made available on the CPA firm's network to
any employee with an access code.
Answer: A
Page
Ref: 11
Objective: Learning Objective 6
Difficulty
: Difficult
AACSB: Analytic
55)
Rolleigh Corp. identifies growth by new product development and product
improvement as the number one corporate goal. An employee at Wrigley's, one of
Rolleigh's wholly-owned subsidiaries, developed an innovation to an existing
product that would directly address a shortcoming in the similar product
offered by Rolleigh's closest competitor. Wrigley's current Return on
Investment (ROI) is 15%, but the product innovation is expected to generate ROI
of only 12%. Awarding bonuses to subsidiary managers based on ROI could result
in:
A)
goal conflict
B)
information overload
C)
goal congruence
D)
decreased value of information
Answer: A
Page
Ref: 4
Objective: Learning Objective 1
Difficulty
: Difficult
AACSB:
Analytic
56)
Which of the following tradeoffs between characteristics of useful information
is least objectionable?
A)
Incomplete information received on a timely basis
B)
Irrelevant information received in an understandable format
C)
Unreliable information easily accessible
D)
Verifiable information received in unreadable format
Answer: A
Page
Ref: 5
Objective: Learning Objective 1
Difficulty
: Moderate
AACSB: Analytic
57)
Paid time-off policies, job descriptions, and procedures manuals are examples
of information needed to support key decisions in what business process?
A)
Hire and train employees
B)
Acquire inventory
C)
Sell merchandise
D)
Collect payment from customers
Answer: A
Page
Ref: 6
Objective: Learning Objective 2
Difficulty
: Easy
AACSB: Analytic
58)
Which of the following is not a key decision to be made when starting a
business?
A)
How to estimate the allowance for uncollectible accounts
B)
Whether to advertise on TV, radio, or newspaper
C)
How to raise capital
D)
Whether to accept American Express
Answer: A
Page
Ref: 5
Objective: Learning Objective 2
Difficulty
: Moderate
AACSB: Analytic
59)
Paying federal payroll taxes is part of which transaction cycle?
A)
Human resources/payroll
B)
Expenditure
C)
Financing
D)
Revenue
Answer: A
Page
Ref: 8
Objective: Learning Objective 4
Difficulty
: Moderate
AACSB:
Analytic
60)
Who of the following would not be involved in the revenue cycle?
A)
Accounts payable clerk
B)
Customer
C)
Cashier
D)
Credit manager
Answer: A
Page
Ref: 7-8
Objective: Learning Objective 4
Difficulty
: Easy
AACSB: Analytic
61)
Which of the following is not one of the three basic types of data about
a specific sales transaction that should be captured by an Accounting
Information System?
A)
Name of the employee who completed the sale
B)
Daily sales quota
C)
Product sold
D)
Date
Answer: B
Page
Ref: 4
Objective: Learning Objective 1
Difficulty
: Easy
AACSB: Analytic
62)
Who of the following is not a stakeholder with whom an accounting
information system typically communicates directly?
A)
Wall Street industry analyst
B)
Venture capitalist
C)
Company that supplies raw materials
D)
Company that purchases finished goods for resale to consumers
Answer: A
Page
Ref: 6
Objective: Learning Objective 3
Difficulty
: Moderate
AACSB: Analytic
63)
Define the concept of a system.
Answer: A system is a set of two or more components
that are somehow interrelated and interact together to achieve a specific goal.
Page
Ref: 4
Objective: Learning Objective 1
Difficulty
: Easy
AACSB:
Analytic
64)
Define data, information, and how the value of information is determined.
Answer: Data: facts that are collected, entered,
recorded, stored, and processed by an AIS. Information: data that has been
organized and processed and is meaningful to its users. Such information is
accessible, relevant, timely, reliable, verifiable, complete, and
understandable. Information is of value when the benefits received from using
or acting upon it outweighs the cost to produce the information.
Page
Ref: 4
Objective: Learning Objective 1
Difficulty
: Easy
AACSB: Analytic
65)
Define an accounting information system.
Answer: An AIS is a system that collects, records,
stores, and processes data to produce information for decision makers.
Page
Ref: 10
Objective: Learning Objective 5
Difficulty
: Easy
AACSB: Analytic
66)
Identify the components of an accounting information system.
Answer: A well-designed AIS consists of people,
procedures and instructions, data, software, information technology
infrastructure, and internal controls and security measures.
Page
Ref: 10
Objective: Learning Objective 5
Difficulty
: Moderate
AACSB: Analytic
67)
What is the CITP designation and why is it important to AIS?
Answer: The CITP designation stands for
"Certified Information Technology Professional." It is awarded to
CPAs who have demonstrated a broad range of knowledge and skill sets in the
areas of accounting and information systems and technology. The AICPA (American
Institute of CPAs) has acknowledged the importance and close relationship that
accounting and information systems share in creating this specialty designation
for accounting information system professionals.
Page
Ref: 11
Objective: Learning Objective 6
Difficulty
: Easy
AACSB:
Analytic
68)
Differentiate between an AIS course and other accounting courses.
Answer: Other accounting courses assume the
preparation or reporting of accounting information is for external or internal
users. However, the AIS course focuses on the flow of accounting information in
the organization from a systems perspective. The AIS course traces the origin,
processing, storing, and ultimate disposal of information. An AIS course also
focuses on business processes, organization structure, information systems, and
corporate planning and goals.
Page
Ref: 10-12
Objective: Learning Objective 6
Difficulty
: Difficult
AACSB: Analytic
69)
What is the purpose behind the five primary activities in the value chain?
Answer: The goal of the five primary activities in
the value chain is to facilitate the business in providing value to its
customers. The five primary activities allow the business to create, market,
and deliver its products and services to its customers, as well as providing
postsale support.
Page
Ref: 13
Objective: Learning Objective 8
Difficulty
: Moderate
AACSB: Analytic
70)
How can an AIS add value to the organization?
Answer: An AIS can increase the efficiency and
effectiveness of the value chain by improving the quality and lowering costs of
products or services, improving efficiency of operations, improving decision
making, enhancing the sharing of knowledge, improving the efficiency and
effectiveness of its supply chain and improving the internal control structure.
Page
Ref: 11-12
Objective: Learning Objective 6
Difficulty
: Moderate
AACSB: Analytic
71)
How can a well-designed AIS improve the efficiency and effectiveness of a company's
value chain?
Answer: The AIS can be designed to allow customers
direct access to a company's inventory and sales order entry systems. This
allows the customer to do more of the work that traditionally has been done by
sales, marketing, and administration personnel. This allows for faster
ordering, and cuts the company's labor costs. It may also have the effect of
allowing the customer more control in a purchase transaction that may bring
more satisfaction and value to the customer.
Page
Ref: 11
Objective: Learning Objective 8
Difficulty
: Moderate
AACSB:
Analytic
72)
Discuss the concept of a system and the issues of goal conflict and goal
congruence.
Answer: A system is a set of two or more components
that are somehow interrelated and interact together to achieve a specific goal.
A system usually consists of smaller components called subsystems. These
subsystems have specific and defined functions, which interact with and support
the larger system. The concept of systems is key to information technology and
AIS. All systems, including the AIS, must work to achieve one or more
organizational goals. Goal conflict results when a decision or action of a
subsystem is inconsistent with another subsystem or the system (organization)
as a whole. Goal congruence results when a subsystem achieves its goals while
contributing to the organization's overall goal. Subsystems should maximize
organizational goals.
Page
Ref: 4
Objective: Learning Objective 1
Difficulty
: Moderate
AACSB: Analytic
73)
Discuss the seven characteristics of useful information.
Answer: The seven characteristics of useful
information are: relevant, reliable, complete, timely, understandable,
verifiable and accessible. These characteristics are qualities that information
should possess to be useful in a business environment. Briefly stated, in order
for information to be useful it must be: 1) relevant, meaning that it reduces
uncertainty and adds to the decision-making process; 2) reliable information is
information that is free from error, and is accurate in its nature; 3) complete
information is information that does not omit any important data, facts, or
aspects about events or activities; 4) information is timely when it is fully
available to enable the decision-making process to proceed; 5) understandable
information must be both in an intelligible and useful format; 6) information
is considered verifiable if two people, acting independently of each other,
produce the same information or the same results. 7) Information is accessible
if it is available to users when they need it and in a format they can use.
Page
Ref: 5
Objective: Learning Objective 1
Difficulty
: Moderate
AACSB:
Analytic
74)
Explain what an AIS is, describe the basic tasks it performs in an
organization, and give some examples of the types of accounting transactions it
processes.
Answer: An AIS consists of six components: people,
procedures and instructions, data, software, information technology
infrastructure, and internal controls and security measures. The AIS performs
three major functions: 1) it collects and stores data about activities and
transactions so that the organization's management, employees, and interested
outsiders can review what has happened; 2) the AIS processes data (that is,
facts that have been collected and stored) into information that is useful for
making decisions, and is of value to the organization; and 3) the AIS provides
adequate controls designed to safeguard the organization's assets, including
its data and information. Common examples of accounting transactions that an
AIS helps to process and track are the sales of products to customers, cash
collections, cash payments, and the recording and payment of the employees'
payroll.
Page
Ref: 10
Objective: Learning Objective 5
Difficulty
: Moderate
AACSB: Analytic
75)
Discuss the components of a supply chain.
Answer: The supply chain shows how an organization
interacts with suppliers, distributors, and customers to provide value in the
products it sells. The supply chain depicts the creation and sale of a productthe chain is
somewhat different when a service is involved. The supply chain has five
components: raw materials; manufacturer; distributor; retailer; and the
consumer. Raw materials come from any number of suppliers, which in turn become
part of a manufacturing process, which produces a product. The business then
provides the product to distributors, who in turn sell the product to retail
businesses. The product is ultimately purchased and used by consumers (who may
be individuals or businesses). It is important to realize that AIS can greatly
impact the traditional supply chain by creating a more efficient and timely
environment in which a business can operate. More efficient operations are more
effective, which in turn lowers costs, and add greater value and create
improved customer satisfaction.
Page
Ref: 14-15
Objective: Learning Objective 8
Difficulty
: Easy
AACSB:
Analytic
76)
How can an AIS become part of the firm's value chain and add value to the
business?
Answer: The AIS can add value by: helping to improve
products and services an organization offers for sale; increasing the quality
of products and services; creating greater efficiency by reducing costs and
saving time; and improving the overall efficiency of the organization. Decision
making is enhanced by the better availability of timely, complete, reliable,
verifiable, and relevant information. A firm can enjoy a competitive advantage
with better customer ordering, billing, and customer service made possible by
an improved AIS. The AIS can also enhance overall communication and use of
knowledge in a business by making the knowledge readily available to interested
parties.
Page
Ref: 11
Objective: Learning Objective 6
Difficulty
: Moderate
AACSB: Analytic
77)
How can the value of the information produced by an accounting information
system be determined? What would a measurement and verification expert think
about quantification and verification of such information?
Answer: A well-designed AIS improves the efficiency
and effectiveness of the value chain by improving the quality and lowering the
overall cost of products or services, improving efficiency of operations,
improving decision making, and enhancing the sharing of knowledge. These are
the benefits of possessing and using information. Drawbacks to possessing and
using such information are the costs of obtaining and maintaining such
information. These costs include investments in people, processes, and
computing and networking hardware and software on an ongoing basis. Costs of the
information are quantifiable to some extent. However, some of the benefits of
using the information involve numerous estimates and assumptions. As such, the
quantification of the benefits of utilizing such information depends on the
accuracy of the assumptions.
Page
Ref: 11
Objective: Learning Objective 6
Difficulty
: Difficult
AACSB:
Analytic
78)
Why have accounting software packages been designed with separate transaction
modules?
Answer: Since every organization does not necessarily
use all of the transaction cycles in its operations, it is to the advantage of
the organization to be able to "pick and choose" from among various
software modules that track and record different transaction cycles. For
example, a law firm would have no need to implement a production cycle module.
Also, the nature of a transaction cycle varies across the broad spectrum of
business organizations. Again, a law firm would have a revenue cycle, but it
would not involve the purchase, receipt, and payment for products or merchandise;
likewise a retail store chain may not sell any consulting services to its
customers.
Page
Ref: 9
Objective: Learning Objective 5
Difficulty
: Easy
AACSB: Analytic
79)
How are "Give and Take" transactions classified in business today and
what impact does this have on AIS?
Answer: The concept of "Give and Take"
transactions has been used to classify business transactions into
"cycles" that have starting points, processes, and end points (or
closure). The majority of business transactions can be classified as revenue,
expenditure, human resources (payroll), production, and financing cycles. AIS
has been modeled after these transaction cycles to achieve its basic functions
of collecting and processing data, providing information useful for decision
making, and establishing adequate controls.
Page
Ref: 5-7
Objective: Learning Objective 4
Difficulty
: Moderate
AACSB:
Analytic
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