AC 341 CPA Exam Practice Questions Chapters 1,3,4

Governance is primarily the responsibility of:

a. Top management

b. The board

c. The CEO

d. Those individuals who are identified by SOX Section 404 as responsible for the system of internal control

b. The board

A company that sells hand-carved statues from rural Indonesia online is using a ___________strategy:

a. Digitization

b. Product differentiation

c. Cost leadership

d. Integrated

b. Product differentiation

Selling a digitized product can:

a. Decrease its cost

b. Improve its quality

c. Both A and B

d. Neither A nor B

c. Both A and B

Which of the following is an example of a detective control?

a. Use of pre-formatted screens for data entry

b. Comparison of data entry totals to batch control totals

c. Restricting access to the computer operations center to data processing staff only

d. Employing a file librarian to maintain custody of the program and data files

b. Comparison of data entry totals to batch control totals

Which of the following statements presents an example of a general control for a computerized system?

a. Limited entry of sales transactions to only valid credit customers

b. Creating hash totals from Social Security numbers for the weekly payroll

c. Restricting entry of accounts payable transactions to only authorized users

d. Restricting access to the computer center by use of biometric devices

d. Restricting access to the computer center by use of biometric devices

Which of the following is true regarding internal control objectives of information systems?

a. Primary responsibility of viable internal control tests rests with the internal audit division

b. A secure system may have inherent risks due to management's analysis of trade-offs identified by cost-benefit studies

c. Control objectives primarily emphasize output distribution issues

d. An entity's corporate culture is irrelevant to the objectives

b. A secure system may have inherent risks due to management's analysis of trade-offs identified by cost-benefit studies

According to COSO, establishing, maintaining, and monitoring an effective internal control system can do each of the following except:

a. Ensure an entity's financial survival

b. Promote an entity's compliance with laws and regulations

c. Help an entity achieve performance targets

d. Provide protection for an entity's resources

a. Ensure an entity's financial survival

This is the process of identifying, analyzing, and managing the risks involved in achieving the organization's objectives.

a. Control activities

b. Control environment

c. Information and communication

d. Risk assessment

d. Risk assessment

Gimbly Cricket Corp. created a decision aid, linked to its data warehouse, to enable senior management to monitor, in real time, changes in oil production at its oil wells in Kazakhstan. This is an example of:

a. Internal, financial reporting

b. Internal, nonfinancial reporting

c. External, financial reporting

d. External, nonfinancial reporting

b. Internal, nonfinancial reporting

Kentucky Fried Opossums reports annually on its environmental impact to the Commonwealth of Kentucky. This is an example of:

a. Internal, financial reporting

b. Internal, nonfinancial reporting

c. External, financial reporting

d. External, nonfinancial reporting

d. External, nonfinancial reporting

According to COSO, which of the following components addresses the need to respond in an organized manner to significant changes resulting from international exposure, acquisitions, or executive transactions?

a. Control activities

b. Risk assessment

c. Monitoring activities

d. Information and communication

b. Risk assessment

Which of the following is not a limitation of internal control?

a. Human judgment in decision making may be faulty

b. External forces may attack the system

c. Management may override internal control

d. Controls may be circumvented by collusion

b. External forces may attack the system

A company's new time clock process requires hourly employees to select an identification number and then choose the clock-in or clock-out button. A video camera captures an image of the employee using the system. Which of the following exposures can the new system be expected to change the least?

a. Fraudulent reporting of employees' own hours

b. Errors in employees' overtime computation

c. Inaccurate accounting of employees' hours

d. Recording of other employees' hours

b. Errors in employees' overtime computation

In the COSO (2011) "cube" model, each of the following are components of internal control except:

a. Monitoring

b. Control activities

c. Operations control

d. Risk assessment

c. Operations control

Controls in the information technology area are classified into the categories of preventive, detective, and corrective. Which of the following is a preventive control?

a. Contingency planning

b. Hash total

c. Echo check

d. Access control software

d. Access control software

According to COSO, which of the following is a compliance objective?

a. To maintain adequate staffing to keep overtime expense within budget

b. To maintain a safe level of carbon dioxide emissions during production

c. To maintain material price variances within published guidelines

d. To maintain accounting principles that conform to GAAP

b. To maintain a safe level of carbon dioxide emissions during production

This fundamental component of internal control is the core or foundation of any system of internal control:

a. Control activities

b. Control environment

c. Information and communication

d. Risk assessment

b. Control environment

Real-time processing is most appropriate for which of the following bank transactions?

a. Credit authorizations for consumer loan applicants

b. Biweekly payroll for bank employees

c. Purchases of fixed assets

d. Expiration of prepaid liability insurance

a. Credit authorizations for consumer loan applicants

Which of the following is true about master files?

a. Master files contain a historical record of all transactions processed by the system.

b. To maintain a manageable file size, master files are periodically purged from the system.

c. Master files contain both processed and unprocessed transactions.

d. Master files are the computerized counterpart of ledgers found in manual systems.

d. Master files are the computerized counterpart of ledgers found in manual systems

In an accounting information system, which of the following types of computer files most likely would be a master file?

a. Inventory subsidiary.

b. Cash disbursements.

c. Cash receipts.

d. Payroll transactions.

a. Inventory subsidiary.

An enterprise resource planning (ERP) system has which of the following advantages over multiple independent functional systems?

a. Modifications can be made to each module without affecting other modules.

b. Increased responsiveness and flexibility while aiding in the decision-making process.

c. Increased amount of data redundancy, since more than one module contains the same information.

d. Reduction in costs of implementation and training.

b. Increased responsiveness and flexibility while aiding in the decision-making process.

Which of the following is an effective control related to personal computing in a small business?

a. Network transit facilities.

b. Locking doors when offices are open and removing storage devices to secure locations.

c. High density data entry and report production.

d. Flashpoint recovery systems.

b. Locking doors when offices are open and removing storage devices to secure locations.

Which of the following statements is true regarding small business computing?

a. General IT controls are less important in a small business computing environment.

b. Spreadsheets should be reviewed and tested by an independent third party.

c. The centralized IT department should be the primary source of control.

d. All of the above.

b. Spreadsheets should be reviewed and tested by an independent third party.

In a computer-based system, the equivalent of a subsidiary ledger is a

a. Transaction file.

b. Archive file.

c. Master file.

d. Reference file.

c. Master file.

Which of the following is NOT true of online/real-time transaction processing systems?

a. Records are usually updated as transactions occur.

b. Random access storage devices are normally required.

c. Network access is not usually required to implement online/real-time systems.

d. Errors are captured and corrected as the transaction occurs.

c. Network access is not usually required to implement online/real-time systems.

Which of the following is true of enterprise resource planning (ERP) systems?

I. The online analytical processing system (OLAP) provides data warehouse capabilities for the ERP system.

II. The ability of an ERP system to provide an integrated view of transactions in all parts of the system is a function of the online transaction processing (OLTP) system.

a. I only.

b. II only.

c. Both I and II.

d. Neither I nor II.

a. I only.

What is an example of the use of the cloud to create software and programs?

a. IaaS

b. PaaS

c. SaaS

d. SAP

b. PaaS

A client would like to implement a management information system that integrates all functional areas within an organization to allow information exchange and collaboration among all parties involved in business operations. Which of the following systems is most effective for this application?

a. A decision support system.

b. An executive support system.

c. An office automation system.

d. An enterprise resource planning system.

d. An enterprise resource planning system.

Which of the following statements about processing methodologies is true?

a. Batch systems, though inexpensive to develop, are much more expensive to operate than online real-time databases.

b. Online real-time processing is especially desirable when transactions occur continuously and are interdependent.

c. The implementation of both batch processing and online real-time processing require access to a networked computer system.

d. Although designed to help ensure accuracy in a batch processing environment, batch control totals are frequently used to control accuracy in online real-time systems as well.

b. Online real-time processing is especially desirable when transactions occur continuously and are interdependent.

Which of the following strategies is important to managing security over mobile systems?

a. Hot sites

b. BCM

c. Teleprinters

d. View-only access

d. View-only access

Which of the following is true of batch processing?

I. In batch processing, data is captured in a transaction file as transactions occur.

II. Periodically (once a day, once a week, etc.), the group of transactions in the transaction file are edited, sorted, and then the transactions are used to update the master file.

a. I only

b. II only

c. Both I and II

d. Neither I nor II

b. II only

During the annual audit, it was learned from an interview with the controller that the accounting system was programmed to use a batch processing method and a detailed posting type. This would mean that individual transactions were

a. Posted upon entry, and each transaction had its own line entry in the appropriate ledger.

b. Assigned to groups before posting, and each transaction had its own line entry in the appropriate ledger.

c. Posted upon entry, and each transaction group had a cumulative entry total in the appropriate ledger.

d. Assigned to groups before posting, and each transaction group had a cumulative entry total in the appropriate ledger.

b. Assigned to groups before posting, and each transaction had its own line entry in the appropriate ledger.

Which of the following statements is true regarding small business computing?

a. Independent third-party review is especially important.

b. Backup procedures are important.

c. Additional supervision of computing may be necessary.

d. All of the above.

d. All of the above.

What is an example of the use of the cloud to access software and programs?

a. IaaS

b. PaaS

c. SaaS

d. SAP

c. SaaS

Which of the following critical accounting functions is most likely to be absent in a small business computing environment?

a. Authorization.

b. Record keeping.

c. Custody.

d. All of these choices are equally likely to be absent.

a. Authorization.

Simone works as an airline reservations agent. She most likely interacts with a:

a. Batch system.

b. Batched, online system.

c. POS system.

d. OLRT system.

d. OLRT system.