Accounting Information system D561

How does data differ from information?

Information is output while data is input.

Which business process sells goods or services for cash or a future promise to receive cash?

Revenue cycle

How can an AIS add value to an organization?

Improving the quality and reducing the costs of products or services

What is a potential effect of an Accounting Information System (AIS) that makes information easily accessible and widely available?

It increases pressures for more decentralization and autonomy.

What is a potential benefit of using IT to redesign supply chain systems?

It can yield tremendous benefits and cost savings.

What is a primary purpose of a Business Process Diagram (BPD)?

BPDs provide a visual representation of the different steps or activities in a business process.

What is the role of a process in a Data Flow Diagram (DFD)?

Processes represent the transformation of data.

What is the purpose of using input/output symbols in a flowchart?

Input/output symbols show input to or output from a system.

Which flowchart shows the relationship among input, processing, and output?

System flowchart

What is the term for the movement of data among processes, stores, sources, and destinations?

Data flow

In a relational database, what does each row in a table represent?

Each row represents a specific occurrence of an entity.

What is the purpose of the referential integrity rule in a relational database?

The referential integrity rule ensures that foreign keys, if not null, must have values that correspond to the value of a primary key in another table.

What is an advantage of using database systems in an organization?

Database systems facilitate cross-functional analysis by defining relationships.

Which is a benefit of database technology for organizations?

Data integration

What is the purpose of the internal-level schema in a database system?

It describes how the data are stored and accessed, including record layouts, definitions, addresses, and indexes.

What are the four steps of the data processing lifecycle?

Data input, data processing, data storage, information output

What is the data processing lifecycle?

The operations performed on data to generate meaningful and relevant information.

What are the four different types of data processing activities?

Reading, creating, deleting, and updating

What is a key advantage of Enterprise Resource Planning (ERP) systems over traditional Accounting Information Systems (AIS)?

ERP systems integrate all aspects of a company's operations with a traditional AIS.

What is a significant disadvantage of implementing an Enterprise Resource Planning (ERP) system?

ERP systems require a high cost and amount of time for implementation.

What are the processes implemented to provide reasonable assurance that assets are safeguarded?

Internal controls

What is likely to happen if management has little concern for internal controls and risk management?

Employees will be less diligent in achieving control objectives.

What are the four ways that management can respond to risk?

Reduce, accept, share, avoid

Which category of control procedure establishes authorization?

Proper authorization of transactions and activities

What is the purpose of the policy and procedures manual in an organization?

It explains proper business practices, needed knowledge and experience, document procedures, transaction handling, and lists resources provided to carry out specific duties.

What is the primary objective of the expenditure cycle?

To minimize the total cost of acquiring and maintaining inventories, supplies, and services

Which principle focuses on improving quality by reducing mistakes?

Six Sigma

What is a key measure to evaluate inventory management in an organization?

Inventory turnover

What is the primary objective of the economic order quantity (EOQ) approach to managing inventory?

To minimize the sum of ordering, carrying, and stockout costs.

What is the purpose of adopting the Evaluated Receipt Settlement (ERS) approach as a control measure in the expenditure cycle?

To eliminate potential errors in supplier invoices by paying based on the counts of received goods matched with quoted prices.

Which unintentional act can pose a threat to an accounting information system?

Lost, erroneous, destroyed, or misplaced data

What is a common characteristic of a perpetrator in the misappropriation of assets?

The perpetrator uses trickery, cunning, or false or misleading information to commit fraud.

What is the most common way to commit a computer fraud?

Alter or falsify computer input

What is hacking?

The unauthorized access, modification, or use of an electronic device or some element of a computer system.

What human traits to hackers exploit in a social engineering attack?

Compassion, greed, trust, or urgency

Which principle of IT governance and management in the COBIT 2019 framework emphasizes the need for organizations to customize business processes and procedures to add value to stakeholders while balancing risks and rewards?

Meeting stakeholder needs

Which organization issued the Internal Control—Integrated Framework (IC) in 1992, which is widely accepted as the authority on internal controls?

The Institute of Internal Auditors (IIA)

What is the primary function of Information Rights Management (IRM) software in the context of protecting sensitive information?

IRM software primarily functions to limit access to specific files or documents and specify the actions that individuals granted access can perform.

What is one of the key topics that should be covered in training to protect sensitive data?

Training on how to use encryption software and the importance of logging out of applications.

Which of the following best describes the purpose of the Generally Accepted Privacy Principles (GAPP)?

To establish internationally recognized best practices for safeguarding customers' personal information.

What is one recommended action to minimize the risk of identity theft based on the provided text?

Monitor your credit reports regularly.

What is a drawback of asymmetric encryption systems compared to symmetric encryption systems?

Asymmetric encryption systems are much slower than symmetric encryption systems.

What type of control ensures that two or more users cannot update the same record simultaneously?

Concurrent update controls

What is an example of an input control?

Range check

Which action can minimize the risk of system downtime due to power outages?

Deploying an uninterruptible power supply (UPS) system

Which factor determines an organization's recovery point objective (RPO)?

The amount of data willing to be recreated or potentially lost

According to COBIT 2019 management practice DSS01.05, which is a recommended action to minimize the risk of system downtime?

Performing preventive maintenance on disk drives

What is the second step of the security lifecycle?

Develop and communicate policy

What is a potential risk if an attacker gains unsupervised direct physical access to information resources?

The attacker can install a keystroke logging device to capture a user's authentication credentials.

Which method of detecting attacks involves deploying a system that looks like a legitimate part of the organization's internal network but is just a decoy system?

Honeypot

What is a potential risk of unsupervised physical access in a virtualization environment?

It exposes the entire virtual network to the risk of theft or destruction and compromise.

Which process is a characteristic of artificial intelligence (AI)?

Learning from past experiences to improve decision-making

An online clothing store integrates a system into its ordering platform to help customers make decisions while placing orders. The system recommends pairing items to be bought together and provides an intuitive search option. It also provides responses to common questions during the ordering process based on customer inputs.

Which AI-based technology does the scenario describe?

Chatbot

The CEO of a manufacturing company is presenting a proposal to use AI in manufacturing, but the board members are unconvinced.

Which argument should the CEO use to support their proposal?

AI-driven robots will perform highly repetitive tasks without fatigue and with better accuracy.

A wealth management company uses AI to develop its clients' investment portfolios over time. The AI program analyzes a large amount of historical stock market data and other variables to predict future stock price changes, and it continuously updates the prediction models. This helps the company's investment managers make informed decisions.

Which application of AI does this scenario describe?

Machine learning

An analysis reveals that a key supplier is facing production problems because of inefficient processes, leading to delays.

Which type of data analytics is described in the scenario?

Diagnostic analytics

A robotics company is planning to implement the time-based model of information security.

Which statement about the time-based model provides support for this decision?

The model allows management to recognize the most cost-effective method of enhancing security.

The MasterCard and Visa operation at an international bank uses a neural network in its system to track the accounts of its 430,000 customers.

Which benefit does the bank have over its competitors who do not use this type of network?

The bank's system can identify new trends and frauds before bank investigators do.

Company A has installed a network intrusion prevention system, and Company B has installed a network intrusion detection system.

What is an advantage that Company A has over Company B in case of a suspicious pattern of network traffic?

Company A's system receives warning alerts and automatically takes measures to stop an alleged attack.

How does the use of the Internet of Things (IoT) help a large manufacturing and shipping company improve its physical access controls?

By deploying tiny sensors throughout its warehouse to offer real-time data about movements into and out of the building

The management of a technology company is adopting the enterprise risk management (ERM) framework to evaluate potential threats and manage them, as well as provide a reasonable guarantee that the company attains its goals.

What is one of the basic principles the management should adhere to in this case?

Management should determine the amount of uncertainty it is prepared to accept as it builds value.

A robotics company has tasked a systems engineer with building its information system in compliance with the Control Objectives for Information and Related Technology (COBIT) framework.

What is one principle that the systems engineer should abide by?

Applying a single, unified framework to develop an overarching management framework

After a large, multinational company based in Argentina paid kickbacks to U.S. government executives in exchange for gas and oil contracts, the company was required to pay a fine of $15 million to the United States and Argentina. As a result of the scandal, the company's CEO had to resign.

Which law did the company violate?

The Foreign Corrupt Practices Act

Which scenario exemplifies the control activity of independent checks on performance?

After a retail company's accounts receivable and accounts payable are updated, the accounting manager compares total debits and credits.

A bank offers online banking services to its customers. Recently, there were reports of phishing attacks targeting the bank's customers, where fraudulent emails attempted to deceive recipients into revealing sensitive information, such as usernames, passwords, and account numbers. To enhance the security of its online banking platform, the bank decided to implement digital certificates for its website.

How does the implementation of digital certificates enhance the security of the bank's online banking platform?

By verifying the authenticity of the bank's website and ensuring that customers are not redirected to deceptive websites

A healthcare organization recently faced a data breach where unauthorized access to sensitive patient information was gained through improper disposal of digital and physical records. In response, the organization is revising its protocols to enhance the security and confidentiality of patient data. The IT department is now tasked with implementing robust measures to ensure that all data is securely disposed of to prevent further breaches.

Which action should the organization take to enhance the data disposal procedure?

Use a special software program to erase computer media by overwriting the disk with indiscriminate data patterns

A financial services company has implemented robust security measures and preventive controls to ensure confidentiality and prevent unauthorized data leakage. However, the development team needs access to realistic data to test new software functionalities designed to improve client services. The company wants to maintain strict controls over sensitive data while enabling effective software development.

Which measure should the company employ to ensure both realistic testing scenarios and the protection of sensitive client information?

Apply data masking techniques to provide developers with a dataset that preserves the form of the original data but swaps sensitive data with tokens

A retail company experienced increasing discrepancies between recorded and actual inventory levels due to errors in manual sales transaction entries. The company is considering several solutions to implement robust controls.

What is a solution to the problem faced by the company?

Implementing an automated reconciliation system that uses advanced analytics to match sales data with inventory levels in real time

Investigation reveals that individuals without proper authorization have been accessing and modifying sensitive financial data, thus contributing to integrity issues. To address this issue, Employee A suggests conducting company-wide training sessions on using the accounting software, Employee B proposes implementing a data backup system, Employee C proposes periodic manual verification of data integrity, and Employee D suggests implementing a robust access control system.

Which employee is correct, and why?

Employee D is correct because their suggestion aims to prevent unauthorized alterations to financial data.

A company has discovered that an error in its financial software has led to the incorrect calculation of tax liabilities across multiple jurisdictions. This error has caused discrepancies in tax filings and potential legal consequences in several countries.

Which corrective control measure should the management take to address the issue?

Conduct a thorough audit and correction of all tax filings to identify and rectify errors

An investment company faces many data processing errors when several employees attempt to update the organization-wide sales sheet simultaneously by accessing the company's database.

Which step should the company take to resolve this issue?

Implement concurrent update controls

A retail company has developed a new accounting information system to record sales transactions. The internal audit team of the company is now conducting unit tests on the input and output fields in the system.

How does this test help the company?

By determining whether the features of the system work as intended

Which scenario exemplifies output fraud?

A sales employee scanned a company paycheck, used publishing software to obliterate the amount and the payee, and printed fabricated paychecks.

A gaming company follows the time-based model of information security. When an internal audit report reveals that the company has strong preventive and corrective controls but weak detective controls, the management decides to implement additional controls to protect confidential data and detect threats.

What is a potential detective control the company should implement?

Log analysis

An e-commerce company is deciding whether to implement a web application firewall on its e-commerce web server or a network intrusion prevention system. It invites suggestions from its data security team.

Which employee's suggestion is accurate, and why?

Employee A recommends implementing a network IPS, as it offers the chance to respond to attacks in real time.

A company is deciding whether it should implement a multifactor authentication system or a multimodal authentication system to improve its security. After extensive discussion, the management decides to implement a multifactor authentication system.

Which statement provides support for this decision?

Multifactor authentication systems use independent credentials, which provide stronger security than multimodal authentication systems that use related credentials.

During a company's internal audit, some inaccuracies are discovered in the financial documents. A deeper investigation shows multiple instances of invalid master data in the expenditure cycle of the ERP system.

What should the management do to mitigate this threat in the future?

Employ data processing integrity controls

An accounting firm's management reviews the internal control procedures and finds that the same employee who accepts payments also reconciles the payments in the system at the end of the day. The management tasks the executives with ensuring proper segregation of duties within the organization's financial processes.

Why is this necessary?

To minimize the risk of fraud

An e-commerce company decides to replace its old database with an accounting information system [AIS] but is uncertain what it wants to accomplish with the new AIS. An employee recommends using prototyping, as it would help the company determine its needs.

Which statement provides evidence against the use of this approach?

Prototyping entails less efficient utilization of organizational resources.

What should a company do to assess the response time of its newly developed accounting information system?

Establish certain system performance measurements

When a marketing company decided to create a centralized information system, it first created a document that listed the tasks to be performed, the employees who will perform them, the completion dates and milestones, and the expected costs.

Which system development control did the company use?

A project development plan

A manufacturing company plans to employ internal control to prevent, detect, and rectify transaction errors as well as fraud in its sales software program.

Which type of internal control is the company planning to implement?

Application control

A smartphone manufacturing company discovers that an employee in the purchasing department has siphoned thousands of dollars over the past six months into their personal account by creating fake invoices. The management immediately terminates the contract of the employee.

What should the management do to avoid such incidents in future?

Segregate the tasks of handling raw materials inventory and approving vendor invoices

A company's internal auditor considers the potential for input fraud when reviewing data about sales transactions.

Which component of the Committee of Sponsoring Organizations (COSO) framework does this represent?

Risk assessment

Which step should a retail company take to develop a control environment that endorses integrity?

Implement a fraud hotline that allows employees to report unethical actions

Which coding technique should be used to assign numbers to a company's purchase orders?

Sequence codes

Which scenario illustrates batch processing?

A software technology company runs its payroll reports and updates its database software every other week.

A tech company that primarily caters to other businesses is comparing the open-invoice method and the balance-forward method of maintaining accounts receivable. Employees A and C recommend using the open-invoice method, as the number of transactions, though small, is high in value. Employees B and D suggest using the balance-forward method, as it is more convenient for customers.

Which employee is correct and why?

Employee A is correct because the open-invoice method allows companies to offer discounts to customers for prompt payments.

Which company needs an enterprise resource planning (ERP) system to obtain the results it wants?

Company A, whose competitive advantage is having real-time information about which of its products are selling the most at key times during each business day

A marketing company has hired an enterprise resource planning (ERP) system consultant to help convert its disparate legacy systems into one ERP system.

What is an advantage of an ERP system that the consultant can mention to get buy-in from company employees who are wary of being trained on a new system?

Reports and procedures are uniform across different business departments.

Which item in the following company employee database is considered an attribute?

Employee Number Employee Name Pay Rate Home Address

#2001 Anika $20/hr. 6245 Greenlane St

#2013 Fatima $23/hr. 9160 Norma Rd

#2027 Oliver $18/hr. 4728 Crawford Avenue

Pay rate

A programmer who has worked for a long time in a food manufacturing company has been asked to develop a relational database for the company. Having worked across multiple departments within the company, the programmer has gained deep insights into the connections between different procedures and operations.

What is the advantage of using the semantic data modeling approach in this case?

The programmer has the ability to leverage their knowledge of business processes.

A retail grocery chain recently implemented an online transaction processing database (OLTP) system to handle all sales transactions. The OLTP has slowed down due to the heavy volume of transactions.

What is one way to solve this problem?

Migrate transaction data from the OLTP to a data warehouse

What is the key difference between the data query language [DQL] and the data definition language [DDL]?

DQL is used to retrieve, sort, order, and display data, whereas DDL builds the data dictionary.

A large company that employs separate accounting systems to store information about various aspects of its business faces challenges in accessing timely and accurate information. Moreover, discrepancies in the data from these accounting systems frequently cause internal problems and compliance issues. A consultant suggests implementing a database system to address these issues.

How will this solve the company's problem?

By creating a common pool of data and minimizing the discrepancies

Which scenario requires the use of the WHERE clause when creating relational database queries?

A programmer wants to filter rows using the criteria operators LIKE and BETWEEN from the joined dataset created using the FROM clause.

Which scenario exemplifies an employee with an external-level schema view of their company's database?

A company's sales manager wants to view information about the marketing budget, but their database view only contains the portion of the database that is related to sales.

A manufacturing company wants to transition from its old database system to a new accounting information system [AIS]. After analyzing various options, the management decides to outsource AIS development, citing lower costs and access to greater expertise.

Which statement offers a deterrent against this decision?

Outsourcing gives companies less control over their systems and data.

A laptop manufacturing company wants to increase its revenue by 25% in the next quarter and estimates that it needs to manufacture 1200 more units by the end of the current week to achieve its goal. The company adds a third shift and formulates a schedule that increases daily output by 250 units.

Which business process does this activity fall under and why?

The conversion cycle because the company is forecasting and planning the number of units required before the next quarter

Which scenario exemplifies an activity related to the IT infrastructure component of an accounting information system (AIS)?

A company is upgrading its network communications devices to increase data processing speeds and thus improve employees' remote access to company data.