b) Information is the primary output of an AIS.

Chapter 1 (new version) c) Data is more useful in decision-making than information.

d) Data and information are the same.
MULTIPLE CHOICE
1. A set of two or more interrelated components that interact to achieve a goal is: 8. Information is
a) A system a) basically the same as data.
b) An accounting information system b) raw facts about transactions.
c) Data c) potentially useful facts when processed in a timely manner.
d) Mandatory information d) data that has been organized and processed so that it's meaningful.

2. This results when a subsystem achieves its goals while contributing to the 9. Humans can absorb and process only so much information. Information __________
organization's overall goal. occurs when those limits are passed.
a) Goal conflict a) overload
b) Goal congruence b) excess
c) Value of information c) anxiety
d) Systems congruence d) discretion

3. Goal conflict may result when 10. The value of information can best be defined as
a) A decision or action of a subsystem is inconsistent with the system as a whole. a) how useful it is to decision makers.
b) A subsystem achieves its goals while contributing to the organization's overall b) the benefits produced by possessing and using the information minus the cost of
goal. producing it.
c) Duplicate recording, storage and processes are eliminated. c) how relevant it is.
d) The data exceeds the amount the human mind can absorb and process. d) the extent to which it maximizes the value chain.

4. Facts that are collected, recorded, stored and processed by an information system 11. The benefit produced by the information minus the cost of producing it.
a) Information a) Goal congruence
b) Data b) Information
c) Systems c) Information overload
d) Mandatory information d) Value of information

5. Information is 12. An accounting information system (AIS) processes __________ to provide users with
a) What happens when the data exceeds the amount the human mind can absorb. __________.
b) The benefit produced by the information minus the cost of producing it. a) data; information
c) Facts that are collected, recorded, stored, and processed by an information system. b) data; transactions
d) Data that have been organized and processed to provide meaning to a user. c) information; data
d) data; benefits
6. Data are 13. How many components are found in an AIS?
a) facts entered, stored, and processed by an information system. a) three
b) processed output that is useful to decision makers. b) four
c) another word for information. c) five
d) quantitative facts that are not qualitative by nature. d) six

7. Which of the following statements below shows the contrast between data and 14. An accounting information system in part consists of
information?
a) Data is the output of an AIS.
 a) People, hardware and programs. c) Mandatory information
b) Information, programs and computers. d) Value of information
c) People, procedures, data, software and information technology infrastructure.
d) Internal controls and accounting records. 21. An AIS is a system of six interrelated components that interact to achieve a goal.
15. Information that reduces uncertainty, improves decision makers' ability to make One of these components, which includes both manual and automated activities that
predictions, or confirms or corrects their prior expectations, is said to be involve collecting, processing, and storing data, is known as
a) Complete a) Information or data
b) Relevant b) Procedures and instructions
c) Reliable c) Software
d) Timely d) Information technology infrastructure

16. Information that is free from error or bias and accurately represents the events or 22. An accounting information system must be able to perform which of the following
activities of the organization is tasks?
a) Relevant a) collect transaction data
b) Reliable b) process transaction data
c) Verifiable c) provide adequate controls
d) Timely d) all of the above

17. Information that does not omit important aspects of the underlying events or activities 23. Which of the following is not an example of a common activity in an AIS?
that it measures is a) buy and pay for goods and services
a) Complete b) sell goods and services and collect cash
b) Accessible c) summarize and report results to interested parties
c) Relevant d) recording of sales calls for marketing purposes
d) Timely
24. Which of the following is not one of the components of an AIS?
18. When two knowledgeable people acting independently each produce the same a) Internal controls and security measures
information, this information is said to be b) People
a) Complete c) Procedures and instructions
b) Relevant d) Software and hardware
c) Reliable
d) Verifiable 25. An AIS must be able to fulfill three important functions in any organization. One
such function is the collecting and storing of data about activities performed by the
19. Data must be converted into information to be considered useful and meaningful for organization. One group that relies on both the adequate collection and
decision-making. There are six characteristics that make information both useful and transformation of data for decision-making purposes for an organization is
meaningful. If information is free from error or bias and accurately represents the a) management.
events or activities of the organization, it is representative of the characteristic of b) interested outsiders.
a) Relevancy c) competitors.
b) Timeliness. d) the government.
c) Understandability
d) Reliability 26. The primary objective of accounting is to
20. The primary consideration when producing this type of information is that its benefits a) implement strong internal controls.
exceeds its costs. b) provide useful information to decision makers.
a) Discretionary information c) prepare financial statements.
b) Essential information d) ensure the profitability of an organization.
 d) both A and C
27. The Financial Accounting Standards Board (FASB), in its Statement of Financial
Accounting Concepts No. 2, has defined accounting as 33. A change in the AIS that makes information more easily accessible and widely
a) an information identification, development, measurement, and communication available within an organization is most likely to first influence the
process. a) organizational culture.
b) a way to provide adequate controls to safeguard an organization's assets. b) customer base.
c) being an information system. c) external financial statement users.
d) a way to collect and transform data into useful information. d) production activity.

28. Which activity below would not be considered to be a "top" accountant work 34. The process of creating value for customers is the result of nine activities (five
activity? primary and four support) that taken together form a
a) process improvement a) value chain.
b) input into future product marketing initiatives b) profitable operation.
c) long-term strategic planning c) successful business.
d) computer systems and operations d) support system.

29. The American Institute of Certified Public Accountants (AICPA) has recognized the 35. The value chain concept is composed of two types of activities known as
importance of AIS and the major impact information technology has on the area of a) primary and support.
accounting. To recognize individual CPAs who have met educational and b) primary and secondary.
experiential requirements in this area, the group formally created the designation c) support and value.
known as d) technology and support.
a) the Certified Management Accountant.
b) the Certified Information Technology Professional. 36. Which of the following is a primary activity in the value chain?
c) the Certified Internal Auditor. a) infrastructure
d) the Certified Data Processing Professional.
b) technology
c) purchasing
30. An analysis conducted by the Institute of Management Accountants shows that the d) marketing and sales
most important activities performed by corporate accountants relate to
a) customer and product profitability. 37. In value chain analysis, what is the activity of arranging the delivery of products to
b) internal consulting.
customers called?
c) process improvement. a) outbound logistics
d) accounting systems and financial reporting. b) inbound logistics
c) shipping
31. The primary focus of an AIS course, as opposed to other IS courses, is on d) delivery
a) application of information technology.
b) use of accounting software. 38. An AIS provides value by
c) understanding how information technology can be used to improve AIS a) improving products or services through information that increases quality and
processes. reduces costs.
d) preparation of financial statements. b) providing timely and reliable information to decision makers.
c) creating new products.
32. The AIS must include controls to ensure d) both A and B
a) safety and availability of data.
b) marketing initiatives match corporate goals.
c) information produced from data is accurate.
39. In Chapter 1, Figure 1-2 shows the factors that influence the design of AIS. The 44. A decision situation that is non-routine and for which no established framework exists
diagram shows a bi-directional arrow between the organizational culture and the AIS. for making the decision is called a(n) __________ decision.
The reason for this two-way interchange between organizational culture and AIS is a) structured
a) that the AIS should not influence the values of the organizational culture. b) semistructured
b) because the organization's culture influences the AIS, and likewise the AIS c) unstructured
influences the organization's culture by controlling the flow of information within d) strategic
the organization.
c) due to the transfer of managers between the two corporate elements. 45. A decision that is repetitive, routine and well understood is
d) the AIS impacts the organization's key strategies. a) structured
b) semistructured
40. The objective of the majority of organizations is to provide value to their customers. c) unstructured
The activities that support such an objective can be conceptualized as forming a value d) strategic
chain. Within this value chain, logistics plays an important role. Logistics is both
inbound and outbound in nature. An example of inbound logistics would consist of
a) the activities that transform inputs into final products or services. 46. Which of the following is an example of a strategic planning decision?
b) the activities that help customers to buy the organization's products or services. a) setting financial and accounting policies
c) the activities that provide post-sale support to customers. b) conducting a performance evaluation
d) the activities that consist of receiving, storing, and distributing the materials used c) budgeting
as inputs by the organization to create goods and/or services it sells. d) developing human resource practices

41. A good example of how an AIS is used to share knowledge within an organization is 47. Decisions about the effective and efficient execution of specific tasks are concerned
a) the use of an expert system to help staff identify the relevant experts who can help with
with a particular client. a) operational control.
b) the use of laptop computers to access a network for messaging worldwide. b) management control.
c) the monitoring of production equipment to watch for defects. c) strategic planning.
d) the use of point-of-sale data to determine hot-selling items. d) tactical planning.

42. Within the value chain conceptual framework, organizations also perform a number 48. Budgeting and human resource practices are examples of
of other support activities that enable the five primary value chain activities to be a) operational control
performed efficiently and effectively. One such support activity is research and b) management control
development. This activity can be identified as a
c) strategic planning
a) firm infrastructure activity. d) tactical planning
b) human resources activity.
c) technology activity.
d) purchasing activity. 49. Accounting information plays major roles in managerial decision making by
a) identifying situations requiring management action.
b) reducing uncertainty.
43. Within the value chain conceptual framework, AIS is shown as a support activity. c) providing a basis for choosing among alternative actions.
The AIS is of value to an organization when it provides accurate and timely d) all of the above
information to help support the five primary value chain activities. When the AIS
provides information in a timely and accurate manner, it stands as an example of
a) improved decision making. 50. Business activities that pertain to product pricing, discount and credit terms, and
b) improving the quality and reducing the costs of products or services. identifying the most and least profitable items are part of the __________ activity in
c) improving efficiency. the organization's value chain.
d) All of the above a) service
b) marketing and sales
 c) operations 55. A strategic position is important to the success and growth of any organization.
d) inbound logistics Harvard professor Michael Porter has identified two basic business strategies. Which
statement below is false regarding these basic strategies?
a) A product differentiation strategy entails adding features or services not provided
51. A principal focus of AIS is to assist with the decision-making function of an by competitors to a product so customers can be charged a premium price.
organization. The degree of support AIS can provide depends on the type of decision b) A low-cost strategy entails striving to be the most efficient producer of a product
or service.
being made. Decisions are categorized in terms of the degree of existing structure or
c) Sometimes a company can succeed in both producing a better product and
the effect of their scope. From the items below, select the description that is an
example of a semi-structured decision. achieving low costs.
a) selecting basic research projects to undertake d) The two basic strategic positions are mutually exclusive.
b) setting a marketing budget for a new product 56. According to Michael Porter, to be successful in the long run, a company must
c) extending credit to an established customer a) deliver greater value to customers and/or create comparable value at a lower cost.
d) hiring a senior manager b) maximize profits.
c) maximize shareholder value.
52. Regarding decision scope, which statement below is true? d) both B and C
a) Operational control is concerned with the effective and efficient use of resources
for accomplishing organizational objectives. 57. A variety-based strategic position involves
b) Management control is concerned with the effective and efficient performance of a) trying to serve most or all of the needs of a particular group of customers.
specific tasks. b) serving a subset of customers who differ from other customers.
c) Strategic planning is concerned with establishing organizational objectives and c) providing a subset of the industry's products or services.
policies for accomplishing those objectives. d) serving all needs of all customers.
d) There is no real correlation between a manager's level in an organization and his
or her decision-making responsibilities. 58. A needs-based strategic position involves
a) trying to serve most or all of the needs of a particular group of customers.
53. A well-designed AIS can improve the decision-making function within the b) serving a subset of customers who differ from other customers.
organization. Which statement below would describe a limitation, rather than a c) providing a subset of the industry's products or services.
benefit, of an efficient AIS? d) serving all needs of all customers.
a) An AIS reduces uncertainty, and therefore accounting information can provide a
basis for choosing among alternative courses of action. 59. An access-based strategic position involves
b) An AIS identifies situations requiring management action.
a) trying to serve most or all of the needs of a particular group of customers.
c) An AIS provides to its users an abundance of information without any filtering or
b) serving a subset of customers who differ from other customers.
condensing of such information.
c) providing a subset of the industry's products or services.
d) An AIS provides information about the results of previous decisions which
d) serving all needs of all customers.
provides decision makers with feedback that can be used in future decision
making.
60. The Internet has changed the way many processes are performed in business today.
The Internet has had a material effect on the five primary characteristics in the value
54. A strategic position is important to the success and growth of any organization. chain and on the strategy adopted by businesses that incorporate use of the Web into
Harvard professor Michael Porter has identified three basic strategic positions.
their business systems. Which statement below is true regarding the Internet relative
Which statement below is false regarding these basic strategic positions?
to a strategic position that a business may adopt?
a) The three basic strategic positions are mutually exclusive of each other.
a) Use of the Internet has reduced the power of buyers.
b) Part of a needs-based strategic position is to identify a target market.
b) The Internet has increased the barriers to entry in many industries.
c) An access-based strategic position involves serving a subset of customers who
c) Use of the Internet reduces pressure to compete on price.
differ from other customers in terms of geographic location or size. d) The most important effect of the development of the Internet in business is the
d) A variety-based strategic position involves producing or providing a subset of the
increased importance of adopting a viable business strategy.
industry's products or services.
Chapter 2 (new version)
MULTIPLE CHOICE 7. Which of the following is not a transaction cycle?
a) revenue
1. An agreement between two entities to exchange goods or services or any other event b) expenditure
that can be measured in economic terms by an organization is c) human resources
a) give-get exchange d) general ledger and reporting
b) transaction
c) revenue 8. All transaction cycles feed information directly into the
d) processing cycle a) financial statements.
b) governmental reports.
2. Groups of related business activities such as the acquisition of merchandise and c) general ledger and reporting system.
payment of vendors are called d) financing operations.
a) transaction cycles.
b) economic cycles. 9. Transaction cycles can be summarized on a high level as "give-get" transactions. An
c) business events. example of "give-get" in the expenditure cycle would be
d) transactions. a) give cash, get cash.
b) give cash, get goods.
3. The transaction cycles approach leads to efficient processing of large number of c) give cash, get labor.
transactions because d) give goods, get cash.
a) transaction cycles are easier to computerize.
b) a large number of transactions within a given cycle can be categorized into a 10. Transaction cycles can be summarized on a high level as "give-get" transactions. An
relatively small number of distinct types. example of "give-get" in the revenue cycle would be
c) the transaction cycle approach represents the natural order of business. a) give cash, get goods.
d) transaction cycles are easy to understand. b) give goods, get cash.
c) give cash, get labor.
4. The basic "give and take" functions of a business have been grouped into transaction d) give cash, get cash.
cycles. The cycle that includes the events of hiring employees and paying them is
known as the 11. The transaction cycles relate to one another and interface with this to generate
a) revenue cycle. information for both management and external parties.
b) expenditure cycle. a) general ledger and reporting system
c) human resources cycle. b) accounting information systems
d) financing cycle. c) computer processor
d) human resources cycle
5. What is the major difference between the revenue and the expenditure cycle?
a) The revenue cycle includes marketing activities; the expenditure cycle does not. 12. Many modern accounting software packages offer separate transaction cycle modules.
b) In the revenue cycle, cash is received; in the expenditure cycle cash is paid out. What is the reason for this?
c) The expenditure cycle includes paying employees. a) Every organization does not need to implement all of the available transaction
d) The revenue cycle includes the activity of obtaining funds from investors. cycle modules.
b) Most businesses do not need the revenue cycle module as part of their AIS.
6. The business owners obtain financing from outside investors, which results in an c) The nature of a given transaction cycle is the same irrespective of the type of
inflow of cash into the company. This transaction is considered to be part of which organization.
cycle? d) A properly designed AIS does not use the concept of separate business transaction
a) the revenue cycle cycles to process transactions.
b) the payroll cycle
c) the production cycle 13. Which of the following statements is false?
d) the financing cycle 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. 20. Certain documents or forms are generated and/or processed with each transaction
d) Every organization should implement every transaction cycle module. cycle. The collection of job time tickets or time sheets is part of which transaction
cycle?
14. The operations performed on data to generate meaningful and relevant information a) the revenue cycle
are referred to as b) the production cycle
a) general ledger and reporting system c) the human resources cycle
b) accounting information system d) the expenditure cycle
c) financial reporting
d) data processing cycle 21. Common source documents for the revenue cycle include all of the following except
a) sales order.
15. One of the steps in the data processing cycle is data input. What is the catalyst for b) receiving report.
data input into a system? c) delivery ticket.
a) The production transaction system automatically checks each hour to see if any d) credit memo.
new data is available for input and processing.
b) The performance of some business activity generally serves as the trigger for data 22. Which of the following documents would be found in the expenditure cycle?
input. a) delivery ticket
c) A general ledger program is queried to produce a trial balance at the end of an b) time card
accounting period. c) journal voucher
d) Data is only input when an authorized party permits the input to occur. d) purchase order

16. A typical source document could be 23. Businesses usually use some type of documents in the data input step of the data
a) in some paper form. processing cycle. Documents that are sent to customers or suppliers and then sent
b) a computer data entry screen. back to the organization in the course of a business transaction are known as
c) a notepad entry. a) turnaround documents.
d) both A and B b) source documents.
c) source data automation.
17. Which step below is not considered to be part of the data processing cycle? d) rubber or bounce-back documents.
a) data input
b) feedback from external sources 24. What is a primary example of source data automation?
c) data storage a) a utility bill
d) data processing b) POS (point-of-sale) scanners in retail stores
c) a bill of lading
18. Data must be collected about three facets of each business activity. What are they? d) a subsidiary ledger
a) the business activity, the resources it affects, the people who participate
b) the business activity, the transactions it creates, the impact on the financial 25. Pre-numbering of source documents helps to verify that
statements a) all transactions have been recorded since the numerical sequence serves as a
c) the inputs, outputs and processes used control.
d) who is involved, what was sold, how much was paid b) no inventory has been misplaced.
c) documents have been used in order.
19. Certain documents or forms are generated and/or processed with each transaction d) all cash has been collected.
cycle. The issuing of a purchase order is part of which transaction cycle?
a) the revenue cycle 26. Source documents generally help to improve accuracy in transaction processing
b) the production cycle because
c) the human resources cycle a) they specify which information to collect due to their structure.
d) the expenditure cycle b) standard information is preprinted on the document.
 c) they provide directions and steps for completing the form. d) subsidiary accounts.
d) All of the above are correct.
34. Regarding codes, which of the following is false?
27. When the sum of all entries in the subsidiary ledger equals the amount in the a) The code should be consistent with its intended use.
corresponding general ledger account, it is assumed that (select all that apply) b) Codes should allow for growth in the number of items to be coded.
a) the recording and posting processes are accurate. c) Coding systems should be as simple as possible.
b) all of the transaction cycles have been completed. d) Coding systems need not be consistent across divisions of an organization.
c) since the ledgers are in balance, adjusting entries are not required.
d) no errors exist in the subsidiary ledger and corresponding general ledger account.
35. To be effective, the chart of accounts must
28. The general ledger account that corresponds to a subsidiary ledger account is known a) be as concise as possible.
as a b) contain only five account categories.
a) dependent account. c) limit account codes to 10 digits or less.
b) attribute account. d) contain sufficient detail to meet the information needs of the specific
c) entity account. organization's AIS.
d) control account.
36. The chart of accounts for a manufacturing corporation would include
29. The systematic assignment of numbers or letters to items to classify and organize a) retained earnings.
them is known as b) common stock.
a) coding c) raw materials inventory.
b) chart of accounts d) all of the above
c) data input
d) pre-numbered documents 37. The chart of accounts of a corporate retail bookstore would probably include
a) work-in-process inventory.
30. Pre-numbered checks, invoices and purchase orders are examples of b) a drawing account.
a) sequence codes c) retained earnings.
b) block codes d) both A and C
c) group codes
d) hierarchical codes 38. In a chart of accounts using three digits for each account, each numeric digit has
meaning to users of the AIS. For example, a numeric digit may represent either a
31. A chart of accounts is an example of (select all that apply) major category of accounts, a primary financial subaccount within each category, or a
a) sequence codes specific account into which transaction data will be posted. Using this example,
b) block codes which digit position would best represent a primary financial subaccount within an
c) group codes account category?
d) hierarchical codes a) first
b) second
32. Inventory items are often codes with these c) third
a) sequence codes d) fourth
b) block codes
c) group codes 39. In transaction processing, generally which activity comes first?
d) hierarchical codes a) recording data in a journal
b) posting items to special journals
33. A listing of general ledger accounts by account number is called the c) capturing data on source documents
a) chart of accounts. d) posting data to a ledger
b) listing of accounts.
c) trial balance.
40. The efficiency of recording numerous business transactions can be best improved by
the use of 47. Characteristics of interest that need to be stored are
a) prenumbered source documents. a) attribute
b) specialized journals. b) database
c) posting references. c) entity
d) segregation of duties. d) record

41. A general journal 48. Computers store data by organizing smaller units of data into larger units, which have
a) is used to record infrequent or non-routine transactions. meaning to users. Data values that are stored in a physical space are called a
b) simplifies the process of recording large numbers of repetitive transactions. a) field.
c) records all detailed data for any general ledger account that has individual sub- b) record.
accounts. c) file.
d) contains summary-level data for every account of the organization. d) database.

42. The general ledger 49. Related records grouped together form a(n)
a) is used to record infrequent or non-routine transactions. a) field.
b) simplifies the process of recoding large numbers of repetitive transactions. b) entity.
c) records all detailed data for any general ledger account that has individual sub- c) file.
accounts. d) database.
d) contains summary-level data for every account of the organization.
50. The set of fields that contain data about various attributes of the same entity forms a
43. A subsidiary ledger a) entity
a) is used to record infrequent or non-routine transactions. b) record.
b) simplifies the process of recoding large numbers of repetitive transactions. c) file.
c) records all detailed data for any general ledger account that has individual sub- d) database.
accounts.
d) contains summary-level data for every account of the organization. 51. Concerning a master file, which of the following statements is false?
a) It is conceptually similar to a ledger in a manual AIS.
44. A specialized journal b) It stores cumulative information about an organization's resources.
a) is used to record infrequent or non-routine transactions. c) It exists across fiscal periods.
b) simplifies the process of recording large numbers of repetitive transactions. d) Its individual records are not changed.
c) records all detailed data for any general ledger account that has individual sub-
accounts. 52. Basic data storage concepts define both entities and attributes. An entity is something
d) contains summary-level data for every account of the organization. about which information is stored. Which item below would not be considered an
entity?
45. An audit trail a) a customer address
a) provides the means to check the accuracy and validity of ledger postings. b) a customer
b) is provided by the ledger and the general journal. c) an employee
c) is automatically created in every computer-based information system. d) an inventory item
d) is a characteristic of interest.
53. Which of the following is conceptually similar to a journal in a manual AIS?
46. Something about which information is stored is a) database
a) attribute b) master file
b) database c) record
c) entity d) transaction file
d) record
54. Which of the following is not one of the four types of file processing? b) Both traditional financial measures and operational data are required for proper
a) changing and complete evaluation of performance.
b) updating c) Most source documents capture both financial and operational data about business
c) deleting transactions.
d) altering d) Traditionally, most AIS systems have been designed so that both financial and
operational data are stored in a manner that facilitates their integration in reports.
55. Periodic updating of the data stored about resources and agents is
a) On-line processing 61. A formal expression of goals and objectives in financial terms is called a(n)
b) real-time processing a) mission statement.
c) batch processing b) strategic plan.
d) data processing c) budget.
d) operational plan.
56. Concerning processing, which of the following statements is true?
a) Batch processing ensures that stored information is always current. 62. A projection of an organization's cash inflows and outflows is known as a(n)
b) Batch input is more accurate than on-line data entry. a) performance budget.
c) On-line batch processing is a combination of real-time and batch processing. b) operating budget.
d) Batch processing is almost never used. c) management budget.
d) cash budget.
57. Federal Express stated in one of its mission statements that "positive control of each
package will be maintained by utilizing . . . electronic tracking and tracing systems." 63. Identify an example of external source data that is important to an organization.
This is an example of which type of data processing? a) customer satisfaction as gauged by surveys
a) real-time processing which features immediate updating as to the location of b) staff salaries as a percentage of sales
packages c) satisfaction of employees with their work environment
b) batch processing which features updating at fixed time periods d) sales revenue divided by the number of hours worked by the sales staff
c) real-time processing which features updating at fixed time periods such as at the
end of an accounting period 64. Some information will have to be collected from __________ sources to determine,
d) batch processing which features immediate updating as to the location of for example, customer satisfaction.
packages a) external
b) internal
58. Documents generated at the end of transaction processing activities are called c) regulatory
a) financial statements d) competitive
b) operational documents
c) reports 65. Performance reports are primarily used for
d) source documents a) financial control.
b) cash planning.
59. Which of the following is not a type of report provided to decision makers by the c) forecasting.
typical AIS? d) financial planning.
a) financial statements
b) customer satisfaction surveys conducted by third parties 66. A report which shows actual results, budgets, and variances is called a
c) managerial reports a) financial plan.
d) All of the above reports are important to decision makers. b) cash budget.
c) performance report.
60. Which statement below regarding the AIS and managerial reports is false d) managerial report.
a) The AIS must be able to provide managers with detailed and operational
information about the organization's performance. 67. Variances to the budget should be interpreted by using the principle of
a) management by exception.
 b) management by objectives. CH 3
c) management by exemption. MULTIPLE CHOICE
d) exceptions to variances.
1. The narratives, diagrams, charts, and other written materials that explain how a
system works are collectively called
68. One of the most important assumptions about how managers will act in a budget-
controlled environment is that: a) documentation.
b) data flows.
a) managers will largely ignore budgets.
c) flowcharts.
b) budgets must be too tight to encourage high aspirations. d) schema.
c) budget slack will exist in almost every budget and is negotiated by all managers.
d) measurement affects behavior. 2. One popular means of documenting a system is to develop diagrams, flowcharts,
tables, and other graphical representations of information. These are often
69. Which managerial tool below is used to provide the organization with financial supplemented by
control? a) product specifications.
a) a cash budget b) narrative descriptions.
b) a performance report c) logic charts.
c) a sales budget d) oral descriptions from management.
d) a customer satisfaction survey
3. The graphic description of the flow of data within an organization is called a
SHORT ANSWER a) systems flowchart.
b) data flow diagram.
70. How are "Give and Take" transactions classified in business today and what impact c) context diagram.
does this have on AIS? d) document flowchart.

71. Name the major transaction cycles. 4. A graphical representation of the flow of documents and information between
departments or areas of responsibility within an organization is called
a) a data flow diagram.
72. What is the purpose of source documents? What controls are embedded in source
b) a document flowchart.
documents? Give two examples of source documents. c) a system flowchart.
d) a program flowchart.
73. Why have accounting software packages been designed with separate transaction
modules? 5. A graphical representation of the relationship among the input, processing and output
in an information system is called
a) a data flow diagram.
74. Describe the purpose of subsidiary and control accounts.
b) a document flowchart.
75. What is an audit trail? c) a system flowchart.
d) a program flowchart.

76. A well-designed data processing cycle should collect data connected with three facets 6. A graphical description of the sequence of logical operations that a computer
of business activity. Name the three facets. performs is called
a) a data flow diagram.
77. Source documents are usually generated in the process of conducting common b) a document flowchart.
business activities. Name a source document connected with the revenue cycle. c) a system flowchart.
d) a program flowchart.

78. Source documents are usually generated in the process of conducting common 7. SAS No. 94 requires that independent auditors be able to
business activities. Name a source document connected with the human resources
a) draw computerized flowcharts.
cycle. b) prepare flowcharts and decision tables before conducting an audit.
c) understand a client's system of internal controls before conducting an audit.
d) prepare and understand any type of system documentation.
 15. In preparing a DFD, when data are transformed through a process, the symbol used
8. The passage of the Sarbanes Oxley Act should be
a) Made documentation skills even more important. a) a circle.
b) Requires public companies to prepare an annual internal control report. b) an arrow.
c) Means that auditors must be able to prepare, evaluate and read documentation tools such as c) a square.
flowcharts. d) two horizontal lines.
d) All of the above.
16. In a DFD, lines that are horizontal and parallel to each other represent
9. Which of the following is not a true statement?
a) data sources and destinations.
a) Documentation tools save an organization both time and money. b) data flows.
b) Documentation tools are used extensively in the systems development process. c) transformation processes.
c) Data flow diagrams and flowcharts are the two most frequently used systems development d) data stores.
documentation tools.
d) Data flow diagrams and flowcharts are difficult to prepare and revise using software packages. 17. In a DFD, a "bubble" is also known as
a) data stores.
10. A data flow diagram b) transformation processes.
c) data flows.
a) is a graphical description of the source and destination of data that shows how data flow within an
d) data destinations.
organization.
b) is a graphical description of the flow of documents and information between departments or areas
of responsibility. 18. An entity that sends or receives data used or produced by the system is called a
c) is a graphical description of the relationship among the input, processing, and output in an a) data source or destination.
information system. b) data store.
d) is a graphical description of the sequence of logical operations that a computer performs as it c) data flow.
executes a program. d) data transformation.

11. In a DFD, a square box represents 19. A data flow diagram (or DFD) has four basic elements. The flow of data between
a) data sources and destinations. processes, data stores, and data sources and destinations is known as
b) data flows. a) data sources and destinations.
c) transformation processes.
b) data flows.
d) data stores. c) transformation processes.
d) data stores.
12. In a DFD, a "data sink" is also known as
20. A data flow diagram (or DFD) has four basic elements. The altering of data from
a) data stores. inputs to outputs is known as
b) transformation processes.
c) data flows. a) data sources and destinations.
d) data destinations. b) data flows.
c) transformation processes.
13. In a DFD, an arrow represents d) data stores.

a) data sources and destinations. 21. A data flow diagram (or DFD) has four basic elements. The people and organizations
b) the direction of data flows.
c) transformation processes.
that send data to and receive data from the system are known as
d) data stores. a) data sources and destinations.
b) data flows.
14. In a DFD, a circle represents c) transformation processes.
d) data stores.
a) data sources and destinations.
b) the direction of data flows.
c) transformation processes.
22. In general, a data destination will be shown by
d) data stores. a) an arrow pointing away.
b) an arrow pointing in.
 c) arrows pointing both ways. 30. Creating a DFD is an iterative process. Each DFD iteration helps the designer to
d) no arrows, only two horizontal lines. refine the diagram and identify the fine points. A DFD created at a high-level or
summary view is referred to as a
23. In the data flow diagram of the customer payment process, "update receivables" will
appear in a) data process diagram.
b) data dictionary diagram.
a) a square. c) content diagram.
b) a circle. d) context diagram.
c) two horizontal lines.
d) none of the above 31. In creating DFDs, a context diagram
24. In the data flow diagram of the customer payment process, "Customer" will appear in a) Includes major transformation processes.
b) Depicts systems boundaries.
a) a square. c) Is not necessary.
b) a circle. d) Is very detailed.
c) two horizontal lines.
d) none of the above 32. In a payroll processing DFD, the "prepare reports" activity will be represented by
__________, the "employee payroll file" will be represented by __________, and the
25. In the data flow diagram of the customer payment process, "Customer payment" will
"bank" will be represented by __________.
appear above or in
a) a circle; two horizontal lines; a square
a) a square.
b) a circle; two horizontal lines; two horizontal lines
b) a circle. c) a rectangle; a square; a circle
c) two horizontal lines.
d) a square; two horizontal lines; a circle
d) an arrow.
33. How should control processes and control actions be represented in a data flow
26. Most processes on a DFD can be identified by
diagram?
a) data in-flows only.
a) using a square to represent a data source and destination
b) data out-flows only.
b) using a circle to represent a transformation process
c) data flows both into or out of a process.
c) using two horizontal lines to represent a data store
d) always being followed by a data store.
d) control processes and actions should be ignored in a DFD
27. Data flows between two symbols on a DFD have more than one data item. More than
34. The term used to refine a high-level or summary view data flow diagram into
one arrow is needed if
successively lower levels to provide greater amounts of detail is
a) data elements always flow together.
b) data elements flow at different times. a) expand.
b) explode.
c) data elements flow to different locations.
d) there is no guideline on use of single or multiple arrows. c) implode.
d) enlarge.
28. The transformation of data in a DFD is represented as a
35. An analytical technique that uses standard symbols to graphically represent an
a) process. information system in a clear, concise, and logical manner is called a
b) data dictionary.
c) data stores. a) data flow diagram.
d) data source and destination. b) flowchart.
c) schema.
29. The storage of data on a DFD is shown by d) narrative.

a) circles. 36. Flowcharts are created using a standard set of symbols. These symbols can be
b) arrows.
c) squares.
divided into four basic categories. A square denotes an auxiliary operation and is
d) two horizontal lines. found in which flowchart symbol category?
a) input/output
b) processing
c) storage
 d) flow and maintenance d) #15

37. What should be the first thing the creator of a flowchart does before beginning a 42. Which symbol would be used in a flowchart to represent a decision?
flowchart? a) #10
a) understand the system to be flowcharted b) #16
b) identify the entries to be flowcharted c) #9
c) design the flowchart so that it proceeds from left to right and top to bottom d) #6
d) use standard flowcharting symbols
43. Which symbol would be used in a flowchart to represent an invoice sent to a
38. When designing either a DFD or a flowchart, a good rule to follow is customer?
a) to proceed from left to right. a) #2
b) to proceed from top to bottom. b) #6
c) to proceed from left to right and top to bottom. c) #1
d) to identify exception procedures by using a rectangle. d) #15

39. Which is a true statement regarding the use of the manual processing symbol in a 44. Which symbol would be used in a flowchart to represent a general ledger?
flowchart? a) #2
a) If a document is moved from one column to another, show the document only in the last column. b) #1
b) Each manual processing symbol should have an input and an output. c) #3
c) Do not connect two documents when moving from one column to another. d) #5
d) Each manual processing symbol should have an off-page connector.
45. Which symbol would be used in a flowchart to represent a manual process?
40. Which is a true statement regarding the document flowchart? a) #5
a) It illustrates the sequence of logical operations performed by a computer. b) #6
b) It is particularly useful in analyzing the adequacy of internal control procedures. c) #10
c) It should ignore control processes and actions. d) #11
d) It is not normally used in the systems design process.
46. Which symbol would be used in a flowchart to represent a connection to another part
Use the chart below to answer the following questions regarding flow chart symbols. of the flowchart on the same page?
a) #4
b) #13
c) #14
d) #15

47. Which symbol would be used in a flowchart to represent a connection to another part
of the flowchart on a different page?
a) #4
b) #13
c) #14
d) #15

48. Which symbol would be used in a flowchart to represent a file of paper documents?
a) #7
b) #8
c) #9
41. Which symbol would be used in a flowchart to represent a computer process? d) #15

a) #1 49. Which symbol would be used in a flowchart to represent a general ledger master file
b) #2
c) #5 kept on magnetic disk?
 a) #2 a) #12
b) #5 b) #13
c) #7 c) #14
d) #8 d) #15

50. Which symbol would be used in a flowchart to represent employee time cards sent by 57. In a document flowchart of a manual payroll processing system, "update employee
department managers to the payroll department? file" will be shown by a(n) __________ symbol, and "prepare payroll check" will be
a) #1 shown by a(n) __________ symbol.
b) #4 a) input; output
c) #11 b) input; manual operation
d) #16 c) manual operation; output
d) manual operation; manual operation
51. Which symbol would be used in a flowchart to represent the display of a report on a
computer screen? 58. A flowchart is an analytical tool used to describe some aspect of an information
a) #1 system. A flowchart that depicts the relationships among the input, processing, and
b) #2 output of an AIS is
c) #3
a) an internal control flowchart.
d) #11 b) a document flowchart.
c) a system flowchart.
52. Which symbol would be used in a flowchart to represent the addition of information d) a program flowchart.
about a step represented in another symbol on the flowchart?
a) #1 59. Which type of flowchart is an excellent vehicle for describing information flows and
b) #5 procedures within an AIS?
c) #11
a) a program flowchart
d) #15 b) a document flowchart
c) an internal control flowchart
53. Which symbol would be used in a flowchart to represent a payroll master file kept on d) a system flowchart
magnetic tape?
a) #4 60. In a program flowchart comparison of one or more variables, the transfer of flow to
b) #7 alternative logic paths is represented by
c) #8
a) a terminal.
d) #9 b) data/information flow.
c) computer operation.
54. Which symbol would be used in a flowchart to represent a beginning, an ending, or a d) decision diamond.
connection to another procedure?
SHORT ANSWER
a) #9
b) #14 61. P62 50) What are the various ways to document a system?
c) #15 62. P62 51) List the various types of flowcharts.
d) #16
63. P 62-63 52) Briefly discuss the various levels of understanding necessary to deal
with and comprehend AIS documentation.
55. Which symbol would be used in a flowchart to represent a flow of data or
documents? 64. P63 59) Name two reasons why it is important to have a working knowledge of
DFDs and flowcharting.
a) #12
b) #13 65. What does SAS no. 94 require that is relevant to documentation tools?
c) #14
d) #15 66. P64 53) What are the basic elements of a data flow diagram?
67. P64 54) What are the basic symbols used in data flow diagrams?
56. Which symbol would be used in a flowchart to represent a connection by a data
communication link? 68. P65 55) When does an analyst need to show two data flow lines in a DFD?