WGU D217 Accounting Information Systems

Which of the following is a problem usually associated with the flat-file approach to data management?

data redundancy

Which problem is characteristically associated with the flat-file approach to data management?

the inability to determine what data is available

A description of the physical arrangement of records in the database is

the internal view.

Which of the following may provide many distinct views of the database?

the user view

The update anomaly in unnormalized tables

occurs because of data redundancy.

The deletion anomaly in unnormalized tables

may result in the loss of important data.

Which document triggers the revenue cycle?

the customer purchase order

Which department is least likely to be involved in the revenue cycle?

The accounts payable department is least likely to be involved in the revenue cycle. Accounts payable is charged with managing the segment of the expenditure cycle that involves payments to vendors and creditors.

The purpose of the sales invoice is to

The purpose of the sales invoice is to bill the customer. The sales invoice will be sent to the customer for payment. At the same time the invoice will also update inventory, send a journal to the general ledger, and record the sales journal.

Which type of control is considered a compensating control for customer payments?

Supervision is a compensating control for customer payments. Compensating controls are put in place when more effective controls are deemed too difficult or costly to implement. Supervision is the simplest and most common form of compensating control.

Commercial accounting systems have fully integrated modules. The word "integrated" means that

The word "integrated" means that the transfer of information among modules occurs automatically. In a fully integrated system, the shipping advice will generate the request for invoice automatically. This eliminates the risk that the invoice request is not processed or is processed for a different amount.

A copy of the purchase order (PO) is sent to the

A copy of the purchase order (PO) is sent to the vendor. The purchase order is the formal document that tells the vendor what material is needed, at what price, in what quantity and on what date.

The departments involved in the purchasing process are purchasing, receiving, inventory control and

The departments involved in the purchasing process are purchasing, receiving, inventory control and accounts payable. Accounts payable completes the purchasing process by authorizing and executing the cash disbursement based on a signal from receiving or inventory control.

When a cash disbursement in payment of an accounts payable is recorded

When a cash disbursement in payment of an accounts payable is recorded the liability account is decreased. On the Balance Sheet, accounts payable is a current liability. When a cash disbursement is recorded, the liability will be reduced.

The greatest risk of misappropriation of funds occurs in

The greatest risk of misappropriation of funds occurs in accounts payable. This may take the form of payments for goods not ordered or received and to vendors that do not exist. The risk can be reduced through supervision, segregation of duties, independent verification, or automated processes.

In a firm with proper segregation of duties, adequate supervision as a compensating control is still necessary in

In a firm with proper segregation of duties, adequate supervision is most critical in receiving. Every day materials arrive on the receiving dock. Until those receipts are recorded in the system, they are invisible to anyone but the receivers and their supervisors. Supervision is a compensating control appropriate before more automated controls take effect. Scanning technology and automated three-way match are technological controls that reduce risk.

The fixed asset system records the

The fixed asset system records the purchase of a new plant. The fixed asset system records property, plant, and equipment used in the operation of the business. These represent the largest investments of the firm.

In a technology enabled payroll system, Personnel, Time Keeping, Payroll, and Accounts Payable connect to which department to pay employees?

In a technology-enabled payroll system, Personnel, Time Keeping, Payroll and Accounts Payable connect to cash disbursements to pay employees. Personnel inputs the basic employee information and rate of pay; Time Keeping collects hours worked and verifies time cards; Payroll inputs the hours worked into the payroll system which calculates gross and net pay, taxes, and other deductions; Accounts Payable approves the payment amount; and finally cash disbursements issues pay checks or direct deposit. The general ledger will be updated after the cash disbursement occurs.

An important reconciliation in the payroll system is

An important reconciliation in the payroll system is that the general ledger compares the labor distribution summary from cost accounting to the disbursement voucher from accounts payable. Cost accounting will be tracking the job tickets to properly account for work in process. Accounts payable will produce a disbursement voucher based on input from timecards. Job tickets and timecards should match when hours and hourly rates are extended.

Which of the following situations represents an internal control weakness?

The distribution of paychecks by the employees' immediate supervisor is an internal control weakness. Paychecks should go directly to employees either by mail or through direct deposit. Giving the responsibility for distribution to the supervisor creates the possibility of loss, theft, or withholding of pay from an employee that the supervisor simply does not like. An additional risk arises if the employee is absent on payday and the supervisor has no secure storage for the check until the employee is back.

Which of the following is NOT a reasonable control for fixed assets?

Requiring that fully depreciated assets be disposed of immediately is not a reasonable control for fixed assets. Fully depreciated assets may have years of useful life remaining. For example, manufacturing machinery may be depreciated over three years but many factories use machines that are 10, 15, or 20 years old if they are well maintained.

What type of data is found in the general ledger master file?

Balances for each account in the chart of accounts are found in the general ledger master file. The text describes the general ledger file as the information hub for the accounting system. Each record in the general ledger master file corresponds with one of the accounts in the chart of accounts. Each record is either a GL Master account (i.e., Sales) or a control account (i.e. Accounts Receivables control)

Which report is an output of the financial reporting system (FRS)?

A comparative balance sheet is an output of the financial reporting system. The law requires that corporations generate a series of financial reports - Income Statement, Balance Sheet, Statement of Cash Flows, Tax Returns, and others. This requirement is met by the financial reporting system.

A characteristic of the management reporting system (MRS) is

The management reporting system (MRS) focuses on internal decision-making information. The MRS is the source for reports that managers will use to analyze business performance such as variance analysis, production efficiency, sales, and purchases.

Big data analytics are characterized by

Big data analytics are characterized by volume, velocity, and variety of data. These are referred to as the three Vs: extreme volumes of data (megabytes, terabytes, petabytes, etc.), the rapid velocity at which the data must be processed (particularly in applications involving machine learning and artificial intelligence), and the wide variety of structured and unstructured data types that need to be integrated (audio, video, external web data, social media, the financial reporting system, the management reporting system).

What function does prescriptive analytics serve?

Prescriptive analytics tells the user what actions should be taken in response to specific questions. For example, some companies use predictive analytics to optimize trade promotions. Prescriptive analytics helps them determine which campaigns to run and for which products.

Which item reflects vital information such as quantities and unit prices?

The sales order contains vital information such as unit prices and quantities.

How do inventory control functions adjust inventory at the time of a return?

An approved credit memo triggers the system to adjust the inventory when items are returned.

Which risk is associated with charge accounts within the revenue cycle?

The clerk can be careless and allow purchases from individuals who do not pay their bills.

Which function reflects the expenditure cycle?

Inventory is a part of the expenditure cycle because the quantities and condition are updated.

What is the purpose of the blind copy?

The blind copy is used to force the clerk to count contents to verify items match.

Which items reflect fixed assets?

Buildings can sold and converted to cash.

What contributes to the success of the electronic data interchange system?

Implementation of agreements contributes to the success by circumventing discrepancies.

What is an example of a payroll system information technology (IT) control?

Direct deposit is an example of an IT control.

Which department is responsible for receiving the supplier's invoice, the purchase order, and the receiving report in order to post the acquisition of fixed assets?

Accounts Payable receives the supplier's invoice, purchase order, and receiving report to post the acquisition of fixed assets in the accounts payable subledger.

Which information from timecards provides an audit trail to support financial reporting?

Payroll expenses should be supported with hours worked by employees on a specified date.

Why are journal vouchers reviewed and approved before entry into the general ledger (GL)?

Journal vouchers are entered into the GL and require a level of review and approval to ensure information is accurate, complete, authorized, and supported.

Why is a management reporting system a control?

Management reporting systems are implemented at the discretion of organization management based on internal user needs to manage and control business activities.

Why is the general ledger history file used for comparative financial reports?

The same format and account structures allow for transactions to be grouped and categorized consistently from year to year.

Which comparison serves as a tool for managers by using data from the budget master file and from the responsibility center file?

A comparison of budgeted amounts in accounts to actual revenue and expense amounts by responsibility center in accounts can signal accounts that require further inquiry.

Which strategic agreement is made between buyer and seller for electronic data interchange?

The strategic agreement of the electronic data interchange technology has specific terms agreed on prior to utilization of the service.

What is a reason for sales returns?

Late deliveries can affect sales returns.

Which risk is associated with charge accounts within the revenue cycle?

The clerk can be careless and allow purchases from individuals who do not pay their bills.

What is a risk associated with one clerk receiving inventory?

Unauthorized purchases can cause excessive inventory and tie up funds.

What is the importance of supervisory control?

This is the compensating control function that allows a manager to review all content of sales for accuracy.

What is the purpose of authorized vendors?

The purpose of authorized vendors is to reduce vendor fraud schemes.

Which procedure should be followed when receiving goods?

All incoming and outgoing items should be physically counted to ensure accuracy.

Which information from timecards provides an audit trail to support financial reporting?

Payroll expenses should be supported by hours worked by an employee on a specified date.

Which entry is made to record wages payable?

To record wages payable, the general ledger accountant will debit work-in-process and credit wages payable.

Which task is included when a supervisor reviews and approves employee time (timecards, time sheets, and job tickets)?

Supervisors review and approve the number of hours worked to determine if information is accurate and complete.

Which journals record the results of transaction cycles?

Transaction cycles are part of the accounting information system and record individual events in the special journals and subsidiary accounts of the general ledger.

Why is a management reporting system a control?

Management reporting systems are implemented at the discretion of organization management based on internal user needs to manage and control business activities.

Which efficiencies do real-time general ledger/financial reporting systems have on an organization's ability to produce financial statements?

An efficiency of a real-time general ledger/financial reporting system is integrated transaction processing, which allows concurrent posting in the system.

Which control framework does the general ledger/financial reporting system (GL/FRS) follow?

The discussion of GL/FRS control activities follows the COSO framework.

Which of the following is one of the core ERP applications?

The core ERP applications are sales, distribution, business planning, shop floor control and logistics. Core applications are those applications that operationally support the day-to-day activities of the business. If these applications fail, so does the business. Typical core applications include, but are not limited to, sales and distribution, business planning, production planning, shop floor control, and logistics. Core applications are also called online transaction processing (OLTP) applications.

The objective of an ERP is

The objective of an ERP is to integrate key processes of the organization, such as order entry, manufacturing, procurement and accounts payable, payroll, and human resources. By doing so, a single computer system can serve the unique needs of each functional area.

Closed Database architecture is

Closed database architecture is similar in concept to the basic flat-file model. Under this approach, a database management system is used to provide minimal technological advantage over flat-file systems. The database management system is little more than a private but powerful file system.

A data mart is

A data mart is a data warehouse created for a single function or department. Modern data warehouses may contain gigabytes of data for use by all business functions and departments. To maximize value for single functions or departments, a data mart may be created within the data warehouse that contains the data specific to the function's requirements. For example, a sales data mart will contain all of the data related to customers, salespeople, inventory, sales orders, etc., but not manufacturing or financial data.

Most organizations implement data warehousing

Most organizations implement a data warehouse as part of a strategic IT initiative that involves an ERP system. Implementing a successful data warehouse involves installing a process for gathering data on an ongoing basis, organizing it into meaningful information, and delivering it for evaluation. The data warehousing process has the following essential stages: Modeling data for the data warehouse, extracting data from operational databases, cleansing extracted data, transforming data into the warehouse model, and finally, loading data into the data warehouse database.

Verisign is

Verisign is a for-profit organization that provides assurance regarding the security of transmitted data. Its mission is to provide digital certificate solutions that enable trusted commerce and communications. Its products allow customers to transmit encrypted data and verify the source and destination of transmissions.

A VAN is

In an EDI environment, a client's trading partner's computer automatically generates electronic transactions, which are relayed across a value-added network (VAN), and the client's computer processes the transactions without human intervention.

Encryption is

Encryption is the conversion of data into a secret code for storage in databases and transmission over networks. The sender uses an encryption algorithm to convert the original message (called cleartext) into a coded equivalent (called ciphertext). At the receiving end, the ciphertext is decoded (decrypted) back into cleartext.

A firewall is

A firewall is a system used to insulate an organization's intranet from the Internet. It can be used to authenticate an outside user of the network, verify his or her level of access authority, and then direct the user to the program, data, or service requested. In addition to insulating the organization's network from external networks, firewalls can also be used to protect LANs from unauthorized internal access

Seals of assurance

In response to consumer demand for evidence that a web-based business is trustworthy, a number of trusted third-party organizations are offering seals of assurance that businesses can display on their website home pages. To legitimately bear the seal, the company must show that it complies with certain business practices, capabilities, and controls. This best known six seal-granting organizations are - Better Business Bureau (BBB), TRUSTe, Verisign, Inc., International Computer Security Association (ICSA), AICPA/CICA WebTrust, and AICPA/CICA SysTrust.

A digital signature is

A digital signature is derived from the digest of a document that has been encrypted with the sender's private key. A digital signature is an electronic authentication technique that ensures the transmitted message originated with the authorized sender and that it was not tampered with after the signature was applied.

Which of the following statements about continuous auditing is true?

Continuous auditing enables the auditor to review transactions at frequent intervals or as they occur. The growth of electronic commerce requires the auditors to rethink their traditional practices. Using intelligent electronic agents, transactions can be continuously monitored, and alarms can sound when an anomaly occurs.

Authentication

Authentication requires accountants to develop a new skill set in the electronic environment. In traditional systems, the business paper on which it was written determines the authenticity of a sales order from a trading partner or customer.

What is a characteristic of the flat-file approach to data management?

Exclusive data ownership is a characteristic of the flat-file system.

Which three types of data management problems are a result of data redundancy?

Data storage, data updating, and currency of information problems are caused by data redundancy.

An organization uses a flat-file data management system. Which problem is caused when customers change their address?

When customers change their address, the address needs to be updated in every file where it appears. The address may be stored across different departments, and it would need to be updated with each one of them.

Which flat-file system problem is solved by using a database approach?

Task-data independence is a problem of flat files that a database approach can solve.

What are order entry, manufacturing, procurement, accounts payable, payroll, and human resources examples of?

Key processes of the organization include order entry, manufacturing, procurement, accounts payable, payroll, and human resources.

Why is there is a high degree of data redundancy in a closed database environment?

Each department and functional area has its own database.

Which list shows the details of vendor shipments and expected receipts of products and components needed for an order?

The materials requirements list shows the details of vendor shipments and expected receipts of products and components needed for the order.

Which system represents multiple module software packages that evolved primarily from traditional manufacturing resource planning (MRP II) systems?

ERPs evolved from in-house systems that were not able to successfully integrate with systems outside the organization.

What is used in a traditional system to provide proof that a transaction has occurred?

Physical documents, sales agreements, and signed invoices are used to provide proof that a transaction has occurred in traditional systems.

What was designed to overcome a private key encryption security weakness?

Public key encryption uses two different keys: one for encoding messages and the other for decoding. Receivers never need to share private keys with senders, which reduces the likelihood the keys will fall into the hands of an intruder.

Which third-party trust organization issues three classes of certificates?

Verisign, Inc. issues three classes of certificates to individuals, businesses, and organizations.

What exemplifies the use of continuous auditing?

An intelligent control agent searches electronic transactions for anomalies.

What describes encryption?

Encryption is the conversion of data into a secret code for storage in databases and transmission over networks.

Which operation represents the steps for the encryption of data?

The sender uses an encryption algorithm to convert the original message (called cleartext) into a coded equivalent (called ciphertext). At the receiving end, the ciphertext is decoded (decrypted) back into cleartext.

What is the role of a database management system (DBMS)?

The DBMS provides controlled access to the database. It is programmed to know which data elements each user is authorized to access.

What describes an efficient information system?

An efficient system makes the same data available for requests from different users.

An organization uses a flat-file data management system. The shipping department receives notice that shipping costs are increasing by 10% effective immediately. Customers placing new orders are still billed with the old shipping costs. Which problem is exemplified in this scenario?

The shipping department must inform the billing department of any changes in shipping costs, or the bills will be issued based on outdated information.

Which flat-file system problem is solved by using a database approach?

Task-data independence is a problem of flat files that a database approach can solve.

What is a potential result of redundant tasks in a closed database environment?

Delays could be caused by redundant data entry.

While in-house, custom-designed systems dealt efficiently with their designated tasks, they did not provide strategic decision support at the enterprise level. What is the reason that they lacked support?

Customization made systems very organization specific. This specificity made combining with systems outside of the organization extremely difficult.

An organization could have more than one system in place; there could be an in-house system along with a newer commercial system. How is the communication among many different systems made possible?

Special software patches need to be applied.

An enterprise resource planning (ERP) system is more than simply an elaborate transaction processing system. What else does an ERP system provide?

It is a decision support tool that supplies management with real-time information and permits timely decisions that are needed to improve performance and achieve competitive advantage.

What can be used to assess the adequacy of a client's access controls?

Many firms are now performing penetration tests designed to assess access control by imitating known techniques that hackers use.

Which attributes are used to describe data that are reliable for use according to the Safe Harbor Agreement?

Organizations need to ensure that the data they maintain are accurate, complete, and current, and thus reliable for use.

Which condition of the Safe Harbor Agreement addresses the privacy concern related to the purposes for which an organization collects and uses information?

An organization must provide individuals with clear notice of "the purposes for which it collects and uses information about them and the types of third parties to which it discloses the information."

Which statement describes the condition of onward transfer?

Unless they have the individual's permission to do otherwise, organizations may share information only with those third parties that belong to the Safe Harbor Agreement or that follow its principles.

Which standard does the Safe Harbor Agreement establish for information?

The two-way agreement between the United States and the European Union establishes standards for information transmittal.

What exemplifies the use of continuous auditing?

An intelligent control agent searches electronic transactions for anomalies.

A primary role for accountants during the detailed design phase is

A primary role for accountants during the detailed design phase is to provide expertise in accounting functions, controls and processes.

An accountant's responsibility in the systems development life cycle (SDLC) is

A primary role for accountants during the systems development lifecycle (SDLC) is to ensure that the system applies proper accounting conventions and rules and possesses adequate control. As with the design phase, accountants must ensure that both the system, and the development process, are applying proper accounting conventions and controls. Not only are proper accounting rules and processes being built into the system but is the system development subject to proper testing and documentation controls as required by SAS 109 and Sarbanes- Oxley.

An accountant's responsibility during the implementation of the system is

A primary role for accountants during the implementation phase is to represent the interests of the accounting and finance department. The member of the project team representing accounting and finance will work with the other team members to ensure that the requirements agreed during the design and development phases are properly implemented. They will look at test results and documentation to ensure that results are correct and meet requirements.

Accountants will provide technical expertise in

Accountants will provide technical expertise in GAAP, GAAS, SEC Requirements and IRS Codes. The implementation of a new accounting or financial information system will need to be sure to include data and reporting that assists the accounting and finance departments in following GAAP, GAAS and meeting SEC and IRS requirements. Accountants are the experts. They guide the project team in meeting these needs.

Documentation standards are set

In the implementation phase, the accountant plays a role in specifying system documentation. Because financial systems must periodically be audited, they must be adequately documented. The accountant must actively encourage adherence to effective documentation standards.