Chapter 1

Accounting Information Systems and the Accountant

True-False Questions
1. There are more workers making products in the information age.
2. Accountants are knowledge workers, along with information systems employees
and consultants.
3. It is not possible to have an information system without a computer.
. Accountants are line workers within business organi!ations.
". Today#s AI$ is an enterprise%wide information system, focused on business
processes.
&. The two primary informational components of an AI$ are financial accounting and
auditing.
'. A good audit trail within the financial accounting system should allow a manager or
auditor to trace any source document back from a report to the original data entry.
(. )anagerial accounting principally provides decision%making information to a
company#s internal managers.
*. The two ma+or managerial functions in a modern organi!ation are planning and
controlling.
1,. The essential steps in performing a systems study are -in order of occurrence./
analysis, implementation, design and initial operation, and follow%up.
11. An accounting information system is a ma+or component of a management
information system.
12. As a result of computeri!ed information processing systems in many organi!ations
today, the need for accountants in these organi!ations has significantly declined.
13. A company#s audit trail is normally easier to follow under a manual data processing
system compared to a computeri!ed information processing system.
1. $ysTrust is an assurance service for companies engaged in electronic commerce.
1". It is important for today#s modern accountant to understand both the capabilities
and the limitations of computers.
1&. Activity%based costing systems focus on cost drivers.
TB 1.1
1'. $ince the true measure of a company#s successful system is the company#s profit
performance, the work involved in a systems study should be principally directed at
the product or service sold by the company and little, if any, consideration need be
given to the people working in the company.
1(. $ince accountants are not normally computer programmers working within the
information processing subsystem, it is unnecessary for them to understand the
capabilities and limitations of computers.
1*. 0ata consist of raw facts that have no meaning to decision%makers.
2,. 1ayroll processing is an e2ample of one of the earliest activities of an AI$.
21. 3ithin the traditional AI$, a sales order would not be considered an accounting
transaction.
22. According to 1eter 0rucker, accounting is concerned more with operations than with
finance.
23. 4perational accounting focuses on a company5s accounting transactions.
2. To date, the primary influence of information technology on financial accounting has
been related to the content of financial reports.
2". 6inancial auditing is considered by many to be a mature industry with limited
prospects for growth.
2&. There are limited career opportunities available for students who study both
accounting and information systems.
2'. In a responsibility accounting system, every one within a company takes
responsibility for the performance of every business unit.
2(. As a result of corporate bankruptcies in 2,,2, the largest public accounting firms
are no longer engaged in any consulting work.
2*. 7ou do not need to be a 81A to become a 8ertified Information Technology
1rofessional.
Multiple-Choice Questions
3,. A good performance measurement system should evaluate/
a. 1rofitability only
b. 8ustomer satisfaction only
c. All aspects of a unit5s performance sub+ect to control
d. All aspects of a unit5s performance whether controllable or not
TB 1.2
31. 9ustifying e2penditures for new technologies is especially difficult because/
a. 7ou do not know how many +obs will be affected
b. :2penses are often recurring and are difficult to estimate
c. )any benefits are intangible and are not easily known or measured
d. 9ustifying a new technology is no different from any other capital budgeting
problem
32. The managerial accounting component of the accounting subsystem contains all
but which one of the following functions/
a. 8ost accounting
b. 6inancial accounting
c. ;udgeting
d. $ystems study
33. )anagerial accounting principally provides information to/
a. $tockholders
b. <overnment regulators -e.g., $:8, 6ederal bank e2aminers.
c. Internal company management
d. 1otential creditors
3. The process by which a financial transaction is recorded so that its flow through the
system can be followed is called/
a. 6inancial shadowing
b. )anagerial trace techni=ue
c. 8oncatenation
d. Audit trail
3". Identify which of the following accounting functions has been automated by most
companies# information processing subsystems/
a. 1osting to ledgers
b. >ecording +ournal entries
c. 1reparing trial balances
d. all of the above
3&. The two ma+or managerial functions in a modern organi!ation are/
a. 1lanning and controlling
b. 4rgani!ing and recording
c. 6inancial and behavioral
d. $upervisory and disciplinary
3'. A good budgetary system is useful for/
a. 1lanning
b. All organi!ational subsystems e2cept accounting
c. 8ontrolling
d. a and c only
e. all of the above
TB 1.3
3(. The essential steps in performing a systems study are -in order of occurrence./
a. Analysis, design, implementation and initial operation, follow%up
b. 0esign, planning, follow%up, analysis, and implementation
c. 1lanning, system specification, analysis, production, implementation
d. 1lanning, analysis, design, implementation, and follow%up
3*. The accounting subsystem must continually interact with the/
a. 1ersonnel subsystem
b. Information processing subsystem
c. 1roduction subsystem
d. b and c only
e. all of the above
,. 3hat has been the effect on accountants in those organi!ations which have
computeri!ed their data processing functions?
a. The need for accountants has disappeared
b. The accountants have become @pure@ bookkeepers
c. The accountants have become involved in more decision%making activities
d. The accountants# decision%making activities have drastically declined
1. 3hat is the first step to be performed by most organi!ations in their accounting
cycles?
a. >ecording business transactions in a +ournal
b. 1reparing a trial balance
c. >ecording closing entries in a +ournal
d. 1reparing transaction source documents
e. none of the above
2. 4perational accounting focuses on/
a. Audit trails
b. Information overload
c. ;usiness processes
d. >eengineering
3. 3hy do many organi!ations maintain subsidiary ledgers for such financial areas as
inventory and accounts receivables?
a. To enable the e=uality of debits and credits to be maintained within the
accounting records
b. To create additional bookkeeping work for the accountants
c. To enable the preparation of period%end balance sheets and income
statements
d. To provide various subsystem managers with information that aids their
decision%making responsibilities
. 3hich systems study step is normally performed first?
a. 0esign
b. Initial operation
c. 6ollow%up
d. Analysis
e. none of the above
". 3hich of the following is not true regarding professional service firms?
TB 1.4
a. The $:8 is in favor of professional service firms e2panding their businesses
to include consulting services.
b. As a result of the corporate bankruptcies and accounting scandals in 2,,2,
professional service firms no longer perform any consulting services.
c. 1rofessional service firms generally offer a variety of assurance services,
including providing assurance over AI$s.
d. In the early 2,,,#s, many large professional service firms sold off the
ma+ority of their consulting practices.
&. 1lanning and controlling are/
a. )utually e2clusive
b. )utually dependent
c. :ssentially mutually competitive functions
d. Aot necessarily related
'. The principal cause for more timely performance reports in the typical modern
organi!ation is due to/
a. ;etter educated management
b. Adoption of progressive management philosophies which stress participative
management -e.g., );4.
c. Information processing systems
d. Aeed for less information
(. 6or performance reports to achieve their control ob+ectives, they must/
a. Include relevant information so that necessary action may be taken to
accomplish organi!ational goals
b. ;e timely so that minimal time elapses between an activity#s occurrence and
the feedback reflecting the activity#s efficient or inefficient performance
c. 1rovide subsystem managers with suggestions as to how they can operate
their subsystems more efficiently
d. all of the above
e. a and b only
*. @:2cessive data reporting@ will likely result in/
a. )assive =uantities of data printed out by a company#s computer
b. The generation of unnecessary reports
c. $ubsystem managers# belief that it is a status symbol to receive large
numbers of internally generated reports
d. Inefficient subsystem manager decision making due to a lack of relevant
information being available
e. all of the above
",. All of the following are necessary components of an information system, except:
a. Inputs
b. 4utputs
c. 8omputers
d. 1rocesses
TB 1.5
"1. An e2ample of an assurance service for a company engaged in electronic
commerce is/
a. :Trust
b. :8Trust
c. $ysTrust
d. 81A 3ebTrust
"2. 3hich of the following is not a component of the balanced scorecard?
a. 8ustomer knowledge
b. Internal business processes
c. Transaction processing
d. 6inancial performance
"3. 3hich of the following best describes assurance services?
a. Auditors are desperate to offer assurance services so that they will still
have business in the future
b. Assurance and auditing are closely related
c. Assurance is a guarantee that there is no fraud in a company
d. There are no likely assurance services that 81As can offer that do not
re=uire accountants to be well%trained in information technology
". >eengineering is/
a. A new type of business performance measurement
b. The same thing as Bstarting from scratchC in redesigning business processes
c. A type of assurance services that 81As hope to offer
d. An approach to effecting incremental change in business processes
"". Information systems auditors are/
a. Auditors who are concerned with analy!ing risks associated with
computeri!ed information systems
b. Individuals who often work closely with financial auditors
c. Auditors who have a lot of technical e2pertise related to information
technology
d. all of the above
"&. The designation for a licensed information systems audit professional is/
a. 81A
b. 8)A
c. 8IA
d. 8I$A
TB 1.6