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AIS Chapters 4 and 5

Terms in this set (30)

The COSO enterprise risk management framework comprises eight sections, one of which is objective setting. COSO identified five types of objectives most organizations should consider in developing an ERM plan. "Completing SEC filings within thirty days of the fiscal year end" is an example of a ___ objective.
Strategic
Reporting
Risk management
Control activity
Reporting
___ comprises seven interrelated elements.
The COSO enterprise risk management framework
The generalized model of business process management
Expectancy theory
All of these
The generalized model of business process management
One of the steps in the generalized model of business process management discussed in the text focuses on collecting process-related data. If Laurie and Milton are concerned about the risks created by inefficiency in the company's current fixed asset purchasing process, they could collect data related to:
(i) the average length of time between an order for a fixed asset and its delivery,
(ii) the costs incurred in the fixed asset purchasing process.
I only
II only
Both I and II
Neither I nor II
Both I and II
Consider the following statements as you respond to the question:

i. Ask managers to think of one hundred uses for a brick, other than for building things.
ii. Assess the educational background and organizational experience of employees.
iii. Conduct a one-day seminar on how business processes can create value in the marketplace.
iv. Encourage managers to suggest ideas, even if they are impractical.
v. Hold weekly meetings to update interested parties on the BPM project; ensure at least one member of top management attends each meeting.
vi. Ignore opinions and insights from people not directly involved with a business process.

The text discussed seven basic principles of business process management. Which statement both illustrates one of the principles and relates to the internal environment component of the COSO enterprise risk management framework?
I
III
V
VI
III
Consider the following statements as you respond to the question:

i. Based on my research and reading, I'm sure I want to pursue a career in fraud examination.
ii. Good grades and leadership skills generally lead to a good job.
iii. I am sure I'll pass the CPA exam on my first attempt.
iv. I can definitely complete my accounting degree within four years.
v. I've spoken to several friends and family members who work for large corporations.

Which pair of statements relates to the same variable in expectancy theory?
I and II
II and III
III and IV
I and V
III and IV
Nestor and Maureen are partners in a small consulting firm located in the Republic of Bufflufia; the firm has six employees. For the last five years, the firm has focused on tax planning and tax return preparation. But, Nestor and Maureen are now interested in expanding the firm's scope of services. They are considering risk management consulting, fraud examination and business valuation as potential areas to expand the firm. They are sure at least three of their six employees would put effort into at least one of those three areas, but expanding the firm's services would require additional training for everyone.

Business valuation is the process of estimating the economic value of an owner's interest in a business, often for the purpose of buying/selling that ownership interest. Based on the short case above, which of the following statements is most true?

Expanding the business into business valuation may require creating or updating the firm's risk management plan.

Expectancy theory can be useful both in deciding whether to expand the business and in working with future business valuation clients.

Both expanding the business into business valuation may require creating or updating the firm's risk management plan and expectancy theory can be useful both in deciding whether to expand the business and in working with future business valuation clients are true.

Neither expanding the business into business valuation may require creating or updating the firm's risk management plan nor expectancy theory can be useful both in deciding whether to expand the business and in working with future business valuation clients is true.
Both expanding the business into business valuation may require creating or updating the firm's risk management plan and expectancy theory can be useful both in deciding whether to expand the business and in working with future business valuation clients are true.
Charlie is a partner in a CPA firm. He wants to make some changes to the company's hiring practices, but is concerned current employees will lack the motivation to do so. Provided he uses an appropriate tool, which problem will be easier to address?
A. Making changes to hiring practices
B. Motivating employees
C. The two problems will be equally easy to address.
D. More information is needed to determine which problem will be easier to address.
More information is needed to determine which problem will be easier to address.
Robert is the president and CEO of Computer Solutions; the firm's main activity is installing enterprise resource planning software. When a client calls Robert, he does an "intake interview" where he assesses the client's needs and learns about their company. Robert tries to interview at least a dozen people at each client, including top management and mid- and lower-level employees.

The interviews Robert conducts with his clients are an example of which stage of the systems development life cycle?
Initiation/planning
Requirements analysis
Design
Test
Requirements analysis
MCL Corporation recently hired a consultant to design and implement a new information system. The consultant was trying to decide whether to discard the old system all at once and put the new system in its place, or to make the transition more gradual. Which step in the systems development life cycle is the consultant dealing with?
Test
Operations & maintenance
Design
Implementation
Implementation
Fran was unhappy with her firm's transaction processing software. Which of the following tools would be most useful to her in making it better?
The capability maturity model
The accounting cycle
The systems development life cycle
COSO's internal control framework
The systems development life cycle
Advantages of using the systems development life cycle include:
(i) strong control,
(ii) opportunity for user input,
(iii) rigidity.
I and II only
I and III only
II and III only
I, II and III
I and II only
Raul was leading a team charged with developing a new system for budgeting. Which of the following questions is best paired with the most appropriate phase of the systems development life cycle?
Initiation/planning: Do we really need a new budgeting system?
Requirements analysis: Do we really need a new budgeting system?
Design: How many people should be on the team?
Operations and maintenance: How many people should be on the team?
Initiation/planning: Do we really need a new budgeting system?
ELH Corporation's process for buying inventory is well defined; the process also has metrics that establish goals for the process. Which level of the capability maturity model best describes ELH's inventory purchase process?
Repeatable
Defined
Managed
Optimized
Managed
Please consider these independent cases as you respond to the question:

• Austin is the managing partner of a small CPA firm. In an effort to standardize certain internal business processes, Austin formed a team that developed a set of guidelines for tasks such as expense reimbursements and information technology purchases. After developing the guidelines, the team devised ways to determine if the processes are performing as expected.
• Julie is the chief financial officer of PSC Corporation. She recently worked with a team to develop a broad set of principles that should characterize PSC's business processes. The team has applied those principles to some tasks in the accounting department; their next task is to teach other PSC employees about the principles.
• Rob is an accountant at CTR Company. The owners of CTR, Lynn and Mark, don't know much about accounting, so Rob completes accounting tasks in whatever way seems best to him.

For Rob to move his company's business processes forward one level in the capability maturity model, he should:

Ask Lynn and Mark to get some accounting training.
Repeat each process at least five times.
List the major processes and establish a timeline with goals for each one.
All of these.
List the major processes and establish a timeline with goals for each one.
Sylla and Wen suggested a three-stage process for evaluating information technology investments. Which step in the process is most closely aligned with the "internal environment" component of the COSO internal control and enterprise risk management frameworks?
Step 1
Step 2
Step 3
None of these; there is no relationship between the Sylla and Wen process and the COSO frameworks.
Step 1
In a conversation about risk management, Miguel and Rafaela produced a ranked list of their company's risk exposures. The ranked list is most closely related to which element of the COSO framework?
Information and communication
Risk assessment
Risk response
Monitoring
Risk assessment
Gelton was leading a team of three co-workers focused on improving their company's process for hiring new employees. They had read the company procedures manual describing the current process, then interviewed newly-hired workers about their experiences. They used the principles of activity-based costing to determine the average cost of hiring a new employee, then created a line graph tracing the average cost over the last twelve months. "Reading the company procedures manual" and "interviewing newly-hired workers" are examples of:

Two different steps in the generalized BPM model discussed in the text.
The second step in the generalized BPM model discussed in the text.
The sixth step in the generalized BPM model discussed in the text.
Things that must happen in every BPM project.
The second step in the generalized BPM model discussed in the text.
One of the steps in the generalized model of business process management discussed in the text focuses on collecting process-related data. If Laurie and Milton are concerned about the risks created by inefficiency in the company's current fixed asset purchasing process, they could collect data related to:
(i) the average length of time between an order for a fixed asset and its delivery,
(ii) the costs incurred in the fixed asset purchasing process.

I only
II only
Both I and II
Neither I nor II
Both I and II
Consider the following statements as you respond to the question:

i. Ask managers to think of one hundred uses for a brick, other than for building things.
ii. Assess the educational background and organizational experience of employees.
iii. Conduct a one-day seminar on how business processes can create value in the marketplace.
iv. Encourage managers to suggest ideas, even if they are impractical.
v. Hold weekly meetings to update interested parties on the BPM project; ensure at least one member of top management attends each meeting.
vi. Ignore opinions and insights from people not directly involved with a business process.

The text discussed seven basic principles of business process management. Which statement both illustrates one of the principles and relates to the internal environment component of the COSO enterprise risk management framework?

I
III
V
VI
III
Brett and Erin are accountants working for XMP Corporation; Brett is very interested in working his way up to being XMP's chief financial officer. He believes if he completes all his assigned tasks well before their established deadlines and controls costs in his area, he will be promoted. Which elements of expectancy theory are illustrated in that example?

Expectancy and instrumentality
Instrumentality and valence
Expectancy and valence
Expectancy, instrumentality and valence
Instrumentality and valence
Jay is trying to convince the company president that risk management is important. Which of the following statements is most true?

Since the company president is involved, expectancy theory is inappropriate for trying to create a good internal environment.

Jay should follow the basic principles of business process management to increase the president's instrumentality.

Jay can use expectancy theory to help create a good internal environment.

None of these statements is true.
Jay can use expectancy theory to help create a good internal environment.
Nestor and Maureen are partners in a small consulting firm located in the Republic of Bufflufia; the firm has six employees. For the last five years, the firm has focused on tax planning and tax return preparation. But, Nestor and Maureen are now interested in expanding the firm's scope of services. They are considering risk management consulting, fraud examination and business valuation as potential areas to expand the firm. They are sure at least three of their six employees would put effort into at least one of those three areas, but expanding the firm's services would require additional training for everyone.
Business valuation is the process of estimating the economic value of an owner's interest in a business, often for the purpose of buying/selling that ownership interest. Based on the short case above, which of the following statements is most true?

Expanding the business into business valuation may require creating or updating the firm's risk management plan.

Expectancy theory can be useful both in deciding whether to expand the business and in working with future business valuation clients.

Both expanding the business into business valuation may require creating or updating the firm's risk management plan and expectancy theory can be useful both in deciding whether to expand the business and in working with future business valuation clients are true.

Neither expanding the business into business valuation may require creating or updating the firm's risk management plan nor expectancy theory can be useful both in deciding whether to expand the business and in working with future business valuation clients is true.
Both expanding the business into business valuation may require creating or updating the firm's risk management plan and expectancy theory can be useful both in deciding whether to expand the business and in working with future business valuation clients are true.
Consider the table below as you respond to the questions:

QRM Corporation
Process for Developing computer-based training modules on employee safety
A I After making changes to the prototype based on employee feedback, use the modules throughout QRM.
Design I B
C I Create a prototype module.
D I Periodically examine the modules to ensure they are working as intended.
Requirements analysis I E
Test I Select a group of employees to experiment with the prototype and provide feedback.
F I G

Which of the following is the best choice for Item E in the table?

Based on feedback from employee interviews, plan the organization and appearance of each module.

State law mandates annual safety training for all employees.

Review the relevant law to determine its specifications.

Require all employees to complete the training.
Review the relevant law to determine its specifications.
Consider the table below as you respond to the questions:

QRM Corporation
Process for Developing computer-based training modules on employee safety
A I After making changes to the prototype based on employee feedback, use the modules throughout QRM.
Design I B
C I Create a prototype module.
D I Periodically examine the modules to ensure they are working as intended.
Requirements analysis I E
Test I Select a group of employees to experiment with the prototype and provide feedback.
F I G

Which of the following is the best choice for Item G in the table?

Based on feedback from employee interviews, plan the organization and appearance of each module.

State law mandates annual safety training for all employees.

Review the relevant law to determine its specifications.

Plan whether to develop or purchase the system
State law mandates annual safety training for all employees.
Which of the following statements would you expect to read in a company memo advocating the use of the systems development life cycle to select general ledger software?

There are ten steps in the accounting cycle.

Using the SDLC can help ensure reliable financial reporting.

Most accounting information systems have five generic parts.

General ledger software assists more with bookkeeping than it does with accounting.
General ledger software assists more with bookkeeping than it does with accounting.
Which of the following statements would you expect to read in a company memo arguing against the use of the systems development life cycle as a form of internal control?

The risks associated with the SDLC are unknown.

The SDLC does not help achieve all four objectives of internal control.

The SDLC is not recognized by COSO.

The SDLC has no relationship to internal control.
The SDLC does not help achieve all four objectives of internal control.
Raul was leading a team charged with developing a new system for budgeting. If he decides to use the systems development life cycle:

The project will fail, since the SDLC cannot be applied to the task.

Forming the team is a result of the first step in the SDLC.

The team must completely abandon any elements of the present budgeting system.

The project will definitely be completed on time and within budget.
Forming the team is a result of the first step in the SDLC.
At what level of the capability maturity model are managers first involved?
Chaotic
Repeatable
Defined
Managed
Chaotic
Please consider these independent cases as you respond to the question:

• Austin is the managing partner of a small CPA firm. In an effort to standardize certain internal business processes, Austin formed a team that developed a set of guidelines for tasks such as expense reimbursements and information technology purchases. After developing the guidelines, the team devised ways to determine if the processes are performing as expected.
• Julie is the chief financial officer of PSC Corporation. She recently worked with a team to develop a broad set of principles that should characterize PSC's business processes. The team has applied those principles to some tasks in the accounting department; their next task is to teach other PSC employees about the principles.
• Rob is an accountant at CTR Company. The owners of CTR, Lynn and Mark, don't know much about accounting, so Rob completes accounting tasks in whatever way seems best to him.

For Julie to move her company's business processes forward one level in the capability maturity model, she should:

Make sure all PSC employees can list the principles her team developed.
Develop a written procedures manual that will help manage the processes.
Set benchmarks for each business process related to cost and time.
None of these; PSC's business processes are already at the highest level of the capability maturity model.
Set benchmarks for each business process related to cost and time.
Jack and Lindsay were choosing a new general ledger system for the company they own. They decided to use three factors for the evaluation: adaptability, strategic fit and training. They considered training three times more important than strategic fit; they considered adaptability twice as important as strategic fit. To keep their evaluation simple, they assigned a weight of "1" to strategic fit. If software package A had scores of 5 on adaptability, 8 on strategic fit and 9 on training, its score using the weighted-rating technique will be:

6
22
45
Some other number.
45
(18)+(25)+(3*9)
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