AIS EXAM 1

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According to the COSO definition, internal controls should address which of the following areas (1.) Effectiveness and efficiency of operations, (2.) Reliability of financial reporting, (3.) Compliance with applicable laws and regulations.

1, 2, and 3

Insufficient cash is an example of ______risk in brown's taxonomy.

Financial

Making operations as efficient as possible is:

A basic purpose of internal control

Which of the following internal controls is most likely to prevent an employee from stealing cash?

Separation of duties

Which of the following is the best example of a corrective internal control if an employee steals cash?

Insurance against theft

Processes like separation of duties and internal audits are most closely associated with which element of the COSO internal control framework?

Control activities

Which of the following internal controls is a form of risk sharing?

Insurance

Which of the following best describes the relationship between the two COSO frameworks discussed in the text?

The enterprise risk management framework is more comprehensive than the internal control framework.

If a company has good segregation of duties, it does not need: 1 pre-numbered documents, 2 internal audits.

Neither 1 nor 2

A strong firewall eliminates the need for: 1 data encryption, 2 virus protection

Neither 1 nor 2

Which type of flowchart gives the user a big picture look?

System

Which type of coding system helps users remember the meaning of the code?

Mnemonic

In an accounting information system, inputs often come in the form of:

Source documents

Internal controls such as ____ help promote information reliability in the accounting information system.

Bank reconciliations

System outputs in an AIS include the general-purpose financial statements, variance analysis reports and:

Schedules of accounts receivable and accounts payable

Documents in an accounting information system are:

Either paper-based or electronic

Which of the following best demonstrates the relationship between accounting information systems and other areas of accounting?

Virtually all areas of accounting involve inputs, processes, outputs, storage and internal controls.

A typical accounting information system comprises ___ parts

Five

Recently, Bumble Beasley was researching information published in 1985. Which of the following topics would he most likely consider "non-current" in his research?

Computer security techniques

An author's identity and background are most closely related to which element of information competence?

Authority

Which of the following is a fact about accounting information systems?

They involve interrelated parts

The web site for Dell Computers is an example of ___ information.

Sponsored/commercial

The study of accounting information systems incorporates knowledge from:

Management, finance and information systems

Human judgment is least important in:

Closing entries

Which type of coding system helps users remember the meaning of the code?

Mnemonic.

Which of the following steps in the accounting cycle occurs first?

Analyze transactions.

A company's adjusting entry for prepaid insurance debited insurance expense for $600. If the policy had a six-month duration, how much did it cost originally?

Cannot be determined from the information given

Which of the following accounting cycle steps is most impacted by information technology?

Posting transactions to the ledger

Which of the following best explains one of the four basic purposes of internal control?

Promoting confidence in financial statements

A foreign company wants to trade its capital stock in the United States. The company hires a consultant with expertise in SOX in response to which form of risk?

Legal and regulatory

Which of the following did Brown identify as forms of operational risk: (i) systems risk, (ii) human error risk, (iii) directors' and officers' liability.

i and ii only

In fulfilling the four purposes of internal control, managers should ensure that:

Costs are less than benefits

Among other things, internal controls should promote conformity with:

Management instructions

The text presented three definitions of internal control. Which of the following statements about them is most true?

None of the three provides absolute assurance that a company has eliminated risk

Processes like separation of duties and internal audits are most closely associated with which element of the COSO internal control framework?

Control activities

Internal Control: Integrated Framework includes all of the following except:

Control assessment

The text identified four basic purposes of internal control and several examples of specific controls. Which of the following demonstrates the strongest relationship between them?

Safeguarding assets, separation of duties

Documents in a flowchart should have: (i) a clear origin, (ii) a clear termination, (iii) multiple copies

i and ii only

Which type of flowchart is depicted here?

Start

C
B Attend Class
Select Classes
D


Purchase books


Enroll in classes End




A

Systems

Which of the following AIS problems would be most easily detected with a systems flowchart?

Too much responsibility in one department

Which type of flowchart depicts instructions for carrying out a task with a computer?

Program

Which column would include "lost or stolen?"

WCGW

Market Risk

changes in stock prices, investment values, interest rates. Not as controllable.

Credit Risk

customers' unwillingness or inability to pay their debts. Controllable by the company

Liquidity Risk

possibility that the company will have insufficient cash or near-cash assets to pay short-term debts. Budgets and spending plans help reduce this risk

Financial Risk

related to monetary activities

Operational Risk

people, assets, and technologies used to create value for the organization's customers

Systems Risk

related to information technology( computerized environment), the risk that IT resources will fail at a critical moment.

Human Error Risk

people int he organization might make mistakes or get involved in unethical actions. This may result as asset misappropriation or theft, divulgence of trade secrets, or other consequences.

Strategic Risks

decisions made at senior management and board of directors level

Legal & Regulatory Risk

management might break laws, resulting in penalties for the organization

Business Strategy Risk

poor decision making related to market competition

Officers' and Directors' liability

people might break laws, resulting in personal penalties

CRIME

Control environment
Risk assessment
Information & communication
Monitoring
Existing control activities

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