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Acct Information 
Systems 
ACCT326 – Fall 2013 ‐ 7380 
M.G. Persh 

 
 

 

FINAL EXAM 
 

You have 3 hours to complete this exam. It is “open book, open notes”, but every
student must complete the exam independently. There are 25 questions on the exam.
Please record your answers on a separate sheet(s) and submit/upload the sheet(s) into
WebTycho (FinalExam tab).

 
 

Section 1: Multiple Choice 

  
1. 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

2. Which of the following is conceptually similar to a journal in a manual AIS?
A) database
B) master file
C) record
D) transaction file

3. Business process reengineering means:
A. configuring the business processes to conform to the functionality of the IT

system.
B. configuring the IT system to the business process for best processing

speed.
C. matching the IT and business processes to achieve the greatest mutual

benefit from each.
D. configuring both IT and business processes to meet the goals of ERP.

 
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4. In a city, electric power is provided to consumers by the city power company. Each
month the power company mails bills to 70,000 households and then processes payments
as they are received. What is the best method for this company to ensure that payment
data entry is efficient and accurate?
A) Well-designed paper forms
B) Source data automation
C) Use of turnaround documents
D) Sequentially numbered bills

5. The form that specifies the components of a product, including descriptions and quantities of
materials and parts needed is the:
A. operations list.
B. bill of materials.
C. engineering.
D. capital budgeting.

6. In a payroll processing DFD, the “prepare reports” activity will be represented by ________,

the “employee payroll file” will be represented by ________, and the “management” will be
represented by ________.

A) a circle; two horizontal lines; a square
B) a circle; two horizontal lines; two horizontal lines
C) a rectangle; a square; a circle
D) a square; two horizontal lines; a circle

7. A report is generated from data stored on magnetic disk. Which one of the following diagrams
represents this activity?
A)

B)

C)

D)

 
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8. The abstract representation of the contents of a database is called the
A) logical data model.
B) data dictionary.
C) physical view.
D) schema.

9. Sandra is a new graduate who has been hired by an old-line, family-owned furniture

manufacturing company. She has been asked to analyze the company’s accounting
information system and to recommend cost-effective improvements. After noting that the
production and sales departments use database systems that are entirely separated, she
recommends that they be combined. Implementation of her recommendation would
benefit the company by contributing to data
A) interaction.
B) integration.
C) redundancy.
D) certification.

10. The supply chain:
A. ends once the raw materials arrive at the manufacturing facility.
B. is an external process only.
C. is both an internal and external process.
D. ends once the product is manufactured and ready for sale.

11. Duplicate checking of calculations is an example of a ________ control, and a procedure

to resubmit rejected transactions is an example of a ________ control.
A) corrective; detective
B) detective; corrective
C) preventive; corrective
D) detective; preventive

12. Sales and sales returns can affect which journals?
A. Accounts receivable, accounts payable, inventory, and sales.
B. Accounts receivable, cash, inventory, and sales.
C. Accounts receivable, accounts payable, purchases, and inventory.
D. Sales, cash receipts, cash disbursements, inventory, and purchases.

13. When processing weekly payroll, an employee accidentally entered 400 for hours

worked. The best data entry control for this error would be
A) a limit check.

 
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B) a check digit.
C) batch total reconciliation.
D) a field check.

14. The possibility that a material error will occur even though auditors are following audit

procedures and using good judgment is referred to as
A) control risk.
B) detection risk.
C) inherent risk.
D) investigating risk.

15. Which auditing technique will not assist in determining if unauthorized programming

changes have been made?
A) Use of a source code comparison program
B) Use of the reprocessing technique to compare program output
C) Interviewing and making inquiries of the programming staff
D) Use of parallel simulation to compare program output

16. An auditor sets an embedded audit module to flag all credit transactions in excess of

$1,500. The flag causes the system state to be recorded before and after each transaction
is processed. The auditor is using
A) an integrated test facility.
B) the snapshot technique.
C) a system control audit review file.
D) audit hooks.

17. Documentation of the accounting system allows:
A. The accountant to analyze and understand the procedures and business process and

the systems that capture and record the accounting data.
B. The non-accountant to create a picture or chart of what should happen within the

accounting system.
C. The investor to see inside the accounting system so that he / she can better

understand the financial statements.
D. The accountant to determine which financial statements will be necessary to

properly report the results of operations.

18. Which of the following statements about internal environment is false?

A) Management’s attitudes toward internal control and ethical behavior have only
minimal impact on employee beliefs or actions.
B) Supervision is especially important in organizations that cannot afford elaborate

 
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responsibility reporting or are too small to have adequate segregation of duties.
C) An overly complex or unclear organizational structure may be indicative of more
serious problems.
D) A written policy and procedures manual is an important tool for assigning authority
and responsibility.

19. A receiving clerk notes that a delivery of 10 units has been received from the vendor, but

the purchase order specified 12 units. The additional 2 units are not needed now. A debit
memo will need to be prepared to adjust for the difference between the quantity ordered
and received. Who should prepare this document?
A) the receiving clerk
B) the vice president/controller
C) the vendor
D) the purchasing manager

20. A prescribed sequence of work steps completed in order to produce a desired result for an

organization is the definition of:
A. Accounting information system
B. Business process
C. Business transaction
D. Financial statement

 
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Section 2: Short Essay and Problems 

 SHORT ESSAY (1‐2 paragraphs should be sufficient): 

 

21. Describe the difficulties that could be encountered when developing an AIS.

 

 
  

22.  Identify the main reasons why companies change existing systems.

23.  Describe the different schemas involved in a database structure. What is the role of
accountants in development of schemas?

  

 
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24.  INTERNAL CONTROL WEAKNESSES (identify 5 potential weaknesses and describe how to
correct them).

The Baker Company manufactures medical equipment. This is a capital intensive industry and
investments in fixed assets exceed $5 million a year. The minimum cost for production equipment is
$75,000. When supervisors want new production machinery, they contact the plant manager. The
plant manager approves or denies the request based on discussions with the production supervisor,
the repair and maintenance supervisor, and the quality control supervisor.

A purchase order is prepared by the purchasing department and sent to one of the three major
suppliers of production machinery for medical equipment. The equipment is delivered immediately to
the production floor and put into service. At the end of the month, the production supervisor informs
the general ledger clerk about the receipt of the machinery. The general ledger clerk establishes an
asset record for the machine. At the end of the year, the general ledger clerk computes straight-line
depreciation based on a 10-year life with a 10 percent salvage value. Depreciation expense is
recorded as a direct reduction of the asset cost.

The repair department performs routine maintenance on all of the production equipment.
Occasionally the repair department rebuilds a machine to extend its useful life. All of the costs
associated with the repair department are charged to manufacturing overhead. When a machine
becomes obsolete, production employees move it to a corner of the factory floor and break it down so
that parts can be used in other machines. Production employees routinely remove parts for personal
use. Some smaller machines have disappeared completely from the factory floor.

The general ledger clerk takes a physical inventory every three years. About 75 percent of the fixed
assets can be located and identified. Other assets have serial numbers that are inaccessible, so the
item cannot be matched to a fixed asset record. Some fixed asset records cannot be traced to an actual
item. Several machines that have been scrapped and are being used for spare parts were matched to
fixed asset records. At the last inventory, the general ledger clerk did not make any adjustments to the
fixed asset records explaining that 75 percent accuracy in the fixed asset physical inventory was
excellent.

Describe five (5) potential internal control weaknesses and, for each weakness, describe briefly how
you would fix it.
 

 
 

 
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25.   FILL-IN THE BLANK: Joe Johnson, Inc. is a small food processing company with four people
working in the sales and billing department. One of the four employees now supervises the other
three. The department performs the following company tasks:

a. Accounts receivable record keeping
b. Approving credit of customers
c. Authorizing customer returns
d. Authorizing new customers
e. Billing customers
f. Cash receipts journal posting
g. Entering orders received
h. Inventory record keeping
i. Maintaining custody of cash
j. Maintaining custody of inventory
k. Reconciling records to the bank statement

Required:

You have asked as a consultant to provide advice as to what tasks should be assigned to each
employee. In assigning tasks, no employee should have more than three tasks and there should be a
proper separation of duties to achieve appropriate internal control.

Show the tasks assigned to each employee (use the TASKS from above):

SUPERVISOR: __________________________________________________________________

EMPLOYEE 1: __________________________________________________________________

EMPLOYEE 2: __________________________________________________________________

EMPLOYEE 3: __________________________________________________________________