91 MCQ S91 *SURGENT MCQ Flashcards
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 decision support system
An executive support system
An office automation system
An enterprise resource planning system
An enterprise resource planning system
An enterprise resource planning system (ERP) integrates all aspects of a company’s operations in its information system. Such systems integrate financial and nonfinancial operating data and collect data from external sources.
The other answer choices are incorrect:
- A decision support system provides information for a particular decision, not enterprise-wide data.
- An executive support system provides information at a high level to support executive strategic planning, not detailed enterprise-wide data.
- An office automation system computerizes the information system but does not provide detailed enterprise-wide data.
ERM Planning
Relevant Terms
Automation
Enterprise Resource Planning (ERP) System
Management Information System (MIS)
Reference
7112.01
7112.02
7112.03
7112.04
A company’s credit manager inadvertently processed an $800 credit memo to refund an item for which the customer had paid $300. Which of the following automated controls would assist the company in preventing such a data entry error?
Size check tests
Check digit tests
Field check tests
Reasonableness tests
Reasonableness tests
Reasonableness tests are designed to ensure the data makes sense when compared to other data. A refund of $800 for a $300 payment would fail the reasonableness test as, in most cases, the refund should match the payment.
The other answer choices are incorrect:
- Check digits are a form of tests to verify ID numbers and would not be useful in comparing two dollar values.
- Field checks are used to determine data entered is of the same type: for example, the test for alphabetical entries in phone numbers or numerical values in last names. They would not help with overpaying on dollar amounts.
- Size checks are not standard tests but are included in this question as an option because they sound like a test a company could perform
Term: Reasonableness Check
A reasonableness check is an edit check of logical correctness of the relationships among the values in an input data set, or the value of an input item with the values of a related data item in a master file. For example, a journal entry that debits selling expense and credits sales revenue is not logical, while a journal entry that debits accounts receivable and credits sales revenue is logical. A salary increase of $1 per month is not logical for any employee while a salary increase of $1,000 per month would only be logical for employees whose salaries were over a certain level.
Not sure where it goes
Relevant Terms
Check Digit
Field Check
Reasonableness Check
A fundamental purpose of a database management system is to:
store all data for an organization in multiple files.
change the manner in which application programs access individual data elements.
reduce the overall complexity of matters that relate to electronic data processing.
reduce data redundancy.
reduce data redundancy.
Reduction of data redundancy and associated costs is a prime objective of database utilization.
The other answer choices are incorrect:
- Storage of data will occur in multiple files regardless of whether or not a database is used. Minimizing the occurrences of data elements within the files is the key to data organization.
- By using a logical view of data, access differences by application programs should be transparent to the programs and programmers.
- Utilization of a database will increase the complexity of data processing.
Term: Data Redundancy
Data redundancy refers to the storage of the same item of data in two or more places (files) within an entity’s information system.
Reference: 7120.05
A database management system (DBMS) understands the data structure and provides a language for defining and manipulating stored data. The primary functions of the DBMS are to store data and to provide operations on the database. The operations usually include creating, deleting, updating, and searching data. A DBMS is comprised of software, hardware, and procedures and should satisfy the following objectives:
- Reduce data redundancy.
- Provide data independent from application programs.
- Provide consistent information for decision-making purposes.
- Provide adequate security and integrity controls.
- Facilitate uniform development and maintenance of application systems.
- Ensure that all applicable standards (e.g., documentation, data naming, data formats) are observed in the representation of the data.
Relevant Terms
Application Program
Data Processing System
Data Redundancy
Database
Database Management System (DBMS)
Reference
7120.05
7120.06
A growing manufacturing company is seeking to optimize its accounting information system (AIS) by automating the recording of business bank transactions. Which of the following scenarios would be most effective in achieving this objective?
Utilize payroll software that calculates all aspects of payroll, including tax deductions, and executes direct deposits.
Purchase an off-the-shelf enterprise resource planning (ERP) system.
Outsource manual data entry for payroll calculations and tax deductions.
Develop an API (application programming interface) that automatically feeds all transactions from the bank interface into the AIS
Develop an API (application programming interface) that automatically feeds all transactions from the bank interface into the AIS.
The correct answer is “develop an API (application programming interface) that automatically feeds all transactions from the bank interface into the AIS.” This option aligns with the company’s goal of automating the recording of business bank transactions. Developing an API that can automatically transfer transaction data from the bank interface into the AIS streamlines the process, reduces manual effort, minimizes errors, and ensures real-time transaction recording, making it the most effective answer choice.
The other answer choices are incorrect:
- “Utilize payroll software that calculates all aspects of payroll” is not the best answer choice in this context, as it focuses on payroll software, which is unrelated to automating bank transaction recording.
- “Purchasing an off-the-shelf enterprise resource planning (ERP) system” may not directly address the specific need to automate bank transaction recording.
- “Outsource manual data entry for payroll calculations and tax deductions” is not related to automating the recording of bank transactions.
ABC Corporation has decided to outsource its payroll processing to a trusted third-party service provider to improve efficiency and reduce administrative overhead. ABC wants to ensure security and data integrity during this transition. Which of the following options supports security and data integrity?
Use a public email server for sharing employee data files with the payroll provider, as it is a convenient and cost-effective option.
Manually input employee data into the payroll provider’s system to avoid potential integration issues.
Share employee data through unencrypted Excel files via a file-sharing service, ensuring compatibility.
Implement a secure API (application programming interface) between the company’s HR system and the outsourced payroll provider’s system to automate data transfer.
Implement a secure API (application programming interface) between the company’s HR system and the outsourced payroll provider’s system to automate data transfer.
The correct answer is “implement a secure API (application programming interface) between the company’s HR [human resources] system and the outsourced payroll provider’s system to automate data transfer.” This allows for automated and real-time data transfer, reducing errors and ensuring data accuracy.
The other answer choices are incorrect:
Using a public email server is not a secure option for sharing sensitive employee data, and it may not ensure secure data integration.
Manually inputting data is time consuming and prone to human errors, making it an inefficient option for data integration.
Sharing data through unencrypted files is not secure and may lead to data integrity issues, potentially compromising data accuracy.
Reference: 7112.18
In order to improve the performance of an accounting information system (AIS), an organization should determine possible changes to its business processes, such as automation and outsourcing. The following example report (section 7112.19) shows typical changes an organization should consider to improve its AIS performance.
Reference: 7112.19
Improving AIS Peformance
Relevant Terms
Integrity (IT)
Reference
7112.18
7112.19
An enterprise resource planning system is designed to:
allow nonexperts to make decisions about a particular problem.
help with the decision-making process.
present executives with the information needed to make strategic plans.
integrate data from all aspects of an organization’s activities.
integrate data from all aspects of an organization’s activities.
The correct answer is “integrate data from all aspects of an organization’s activities” because enterprise resource planning (ERP) systems integrate all aspects of a company’s operations in its information system. Such systems integrate financial and nonfinancial operating data and collect data from external sources.
The other answer choices are incorrect:
“Allow nonexperts to make decisions about a particular problem” and “help with the decision-making process” are incorrect because ERP systems provide the data but do not enhance the ability to make decisions based on that data.
“Present executives with the information needed to make strategic plans” is incorrect because ERP systems provide operating data, not information from the analysis of that data or projections about the future needed to make strategic plans
ERM Planning
Relevant Terms
Data
Enterprise Resource Planning (ERP) System
Information System
Reference
7112.01
7112.02
7112.03
7112.04
An information system adds value to an organization by improving all of the following except:
the quality of products or services.
the efficiency of operations by providing timely information.
the efficiency and effectiveness of the supply chain.
customer relations by providing product cost information to wholesalers.
customer relations by providing product cost information to wholesalers.
Providing confidential product cost information to individuals outside the firm (such as wholesalers) decreases an organization’s value and competitive edge.
The other answer choices all add value to an organization: An information system adds value to an organization by improving the quality and reducing the costs of products or services; improving the efficiency of operations by providing more timely information; improving decision making by providing accurate information promptly; sharing knowledge and expertise, thereby improving operations and providing a competitive advantage; and improving the efficiency and effectiveness of its supply chain.
Accounting Information Systems
Relevant Terms
Information System
Reference
7112.05
7112.06
7112.07
7112.08
7112.09
An information system has many characteristics for financial information to be useful. What characteristics best indicate useful information for decision makers?
Relevant, timely, understandable, and interesting
Relevant, comparable, timely, complex, and interesting
Relevant, faithfully represented, comparable, detailed, complex, and internally verifiable
Relevant, faithfully represented, comparable, timely, understandable, and verifiable
Relevant, faithfully represented, comparable, timely, understandable, and verifiable
Information should be relevant, faithfully represented, comparable, timely, understandable, and verifiable; these are the best characteristics to indicate useful information.
There are several characteristics that make information useful for decision making. Information does not need to be interesting or complex to be useful.
Reference: 7112.23
Information systems (IS) should fulfill several important functions:
Information Systems
Relevant Terms
Information System
Reference
7112.23
An information system is composed of which of the following components?
The information technology infrastructure
The software used to process the organization’s data
The people who operate the system and perform its various functions
All of the answer choices are correct.
All of the answer choices listed are components of information systems. Information systems are composed of the information technology infrastructure, the software used to process the organization status, and the people who operate the system and perform its various functions.
Accounting Information Systems
Relevant Terms
Data Processing System
Information System
Management Information System (MIS)
Software
Reference
7112.05
7112.06
7112.07
7112.08
7112.09
An information system should fulfill all of the following functions except:
safeguard an organization’s assets and data.
ensure that the information produced was reliable and accurate.
collect and store data.
transform information into data.
The correct answer is “transform information into data” because an information system should transform data into information, not the other way around. Once data is collected, it is the job of the information system to transform that data so it can be used by management to make decisions.
The other answer choices are all functions that an information system should fulfill: safeguard an organization’s assets and data; ensure that the information produced was reliable and accurate; and collect and store data.
Information systems (IS) should fulfill several important functions:
- Provide adequate controls to:
1. safeguard the organization’s assets and data.
2. ensure that the information produced is both reliable and accurate. - Collect and store data: Data is any and all of the facts that are collected, stored, and processed by an information system. Data is one of an organization’s most valuable assets. Data includes both quantitative and qualitative items and may be financial or operational in nature.
- **Transform data into information: **Once collected, it is the job of the information system to transform data into information so it can be used to make decisions. Thus, information is data that has been organized and processed to provide meaning.
- There are several characteristics that make information useful for decision making. In Statement of Financial Accounting Concepts (SFAC) 8, the Financial Accounting Standards Board (FASB) states that in order for financial information to be useful, it must be relevant and faithfully represent what it purports to represent. The usefulness of financial information is enhanced if it is comparable, verifiable, timely, and understandable.
1. Relevant: Information is relevant if it reduces uncertainty, improves decision makers’ ability to make predictions, or confirms or corrects their prior expectations.
2. Faithfully represented: Information is faithfully represented if it is free from error or bias and completely represents the events or activities of the organization.
3. Comparable:For information to be comparable, it must enable users to identify similarities and differences between two sets of economic phenomena
4. Timely: Information is timely if it is provided in time to enable decision makers to use it to make decisions.
5. Understandable: Information is understandable if it is presented in a useful and intelligible format.
6. Verifiable: Information is verifiable if two knowledgeable people acting independently would each produce the same information.
Not sure where it goes
During a SOC 2® engagement, what is the main purpose of obtaining detailed system documentation from the service organization?
To immediately report any discrepancies to the organization
To assess control maturity within the organization
To simulate hypothetical scenarios to challenge control effectiveness
To understand the system components’ physical, logical, and interaction
To understand the system components’ physical, logical, and interaction
Obtaining detailed system documentation in a SOC 2 engagement serves the primary purpose of helping auditors understand the physical, logical, and procedural environment of the service organization’s systems. This includes gaining insights into the interaction of system components, configurations, and processes. Understanding these aspects is crucial for effectively evaluating controls within the engagement context.
The other answer choices are incorrect:
“To immediately report any discrepancies to the organization” is incorrect because obtaining system documentation is primarily aimed at understanding the system’s environment and components, not immediately reporting discrepancies.
“To simulate hypothetical scenarios to challenge control effectiveness” is incorrect because simulating scenarios is a separate step in the SOC 2 engagement process and not the main purpose of obtaining system documentation.
“To assess control maturity within the organization” is incorrect because assessing control maturity is an essential step but not the primary purpose of obtaining detailed system documentation.
SOC 2
7112.22 SOC 2
During a SOC 2® engagement, what is the primary purpose of evaluating the operational effectiveness of controls through simulation?
Gather materials for the assessment
Assess the organization’s security controls
Estimate the financial impact of deficiencies
Create hypothetical scenarios to challenge control effectiveness
Create hypothetical scenarios to challenge control effectiveness
In a SOC 2 engagement, evaluating the operational effectiveness of controls through simulation involves creating hypothetical scenarios that challenge the controls in place. This testing ensures that the controls are well-designed and capable of effectively mitigating risks and meeting the Trust Services Criteria (TSC) principles.
The other answer choices are incorrect:
- “Gather materials for the assessment”: Evaluating operational effectiveness through sampling and simulation is not primarily about gathering materials but testing control effectiveness.
- “Assess the organization’s security controls”: While assessing security controls may be a component of a SOC 2 engagement, the primary purpose of evaluating operational effectiveness is to challenge controls, not to assess security controls in general.
- “Estimate the financial impact of deficiencies”: The primary purpose is not to estimate financial impacts but to assess control effectiveness under different scenarios.
SOC 2
During a SOC 2® engagement, what is the primary purpose of evaluating the operational effectiveness of controls through simulation?
Gather materials for the assessment
Assess the organization’s security controls
Estimate the financial impact of deficiencies
Create hypothetical scenarios to challenge control effectiveness
Create hypothetical scenarios to challenge control effectiveness
The correct answer is “create hypothetical scenarios to challenge control effectiveness.” In a SOC 2 engagement, evaluating the operational effectiveness of controls through simulation involves creating hypothetical scenarios that challenge the controls in place. This testing ensures that the controls are well-designed and capable of effectively mitigating risks and meeting the Trust Services Criteria (TSC) principles.
The other answer choices are incorrect:
- “Gather materials for the assessment”: Evaluating operational effectiveness through sampling and simulation is not primarily about gathering materials but testing control effectiveness.
- “Assess the organization’s security controls”: While assessing security controls may be a component of a SOC 2 engagement, the primary purpose of evaluating operational effectiveness is to challenge controls, not to assess security controls in general.
- “Estimate the financial impact of deficiencies”: The primary purpose is not to estimate financial impacts but to assess control effectiveness under different scenarios.
Relevant Terms
Operational Effectiveness
SOC 2 Type 1 Report
SOC 2 Type 2 Report
System and Organization Controls (SOC) Reports
Trust Services
Reference
7112.22
Authorities
Trust Services Criteria
Enterprise resource planning (ERP) systems should provide which of the following services?
Data storage, data analysis, data optimization, and reporting
Data collection, data management, data visualization, and reporting
Data collection, data reporting, data audit, and data encryption
Data collection, data analysis data implementation, and reporting
Data collection, data analysis, data implementation, and reporting
“Data collection, data analysis, data implementation, and reporting” accurately lists the essential services that ERP (enterprise resource planning) systems should provide.
The other answer choices are incorrect:
- Data storage is a part of ERP systems, but it is more about storing and retrieving data rather than optimizing it. Data optimization typically involves database management and performance tuning, which is not a primary function of ERP.
- Data management and data visualization are not typically considered primary services provided by ERP systems. While ERP systems do manage data, it is more about data storage, retrieval, and processing, rather than comprehensive data management. Data visualization, on the other hand, is usually associated with business intelligence (BI) tools rather than ERP systems.
- Data audit and data encryption are not typically considered core services of ERP. Data auditing and encryption are more associated with security and compliance solutions rather than ERP functionalities.
ERM Planning
Relevant Terms
Enterprise Resource Planning (ERP) System
Reference
7112.01
7112.04
FinTech Innovations is a small and fast-paced financial services company that relies heavily on its AIS to support its operations. Which of the following options will most likely improve the performance of the company’s AIS?
Implement a new accounting software system.
Outsource all accounting functions to a third-party provider.
Hire more experienced accounting staff.
Automate manual accounting tasks.
Automate manual accounting tasks.
Automating manual accounting tasks is one of the most effective ways to improve the performance of an AIS (accounting information system). By automating manual accounting tasks, FinTech Innovations can free up its accounting staff to focus on more strategic and value-added activities. Additionally, automation can help to reduce errors and improve the accuracy and timeliness of financial reporting.
The other answer choices are incorrect:
Implementing a new accounting software system can be a complex and time-consuming process, and there is no guarantee that the new system will perform any better than the existing system.
Outsourcing all accounting functions to a third-party provider can lead to a loss of control over the AIS and can make it more difficult to integrate the AIS with other business systems.
Hiring more experienced accounting staff may not be enough to improve the performance of the AIS if the underlying processes are inefficient or outdated.
HBC Corp is working to reconcile its cash receipts process with documented procedures. Sarah, the sales process manager, is leading this effort. Which of the following steps should Sarah take to achieve the reconciliation?
Conduct an end-to-end review of the flow of information from lead capturing through to the invoicing stage.
Ensure that invoices are generated and authorized for all sales transactions per standard procedures.
Recommend changes to the cash receipts process without conducting a comprehensive analysis.
Perform a detailed comparison between the documented cash receipts process and the observed process in practice.
Perform a detailed comparison between the documented cash receipts process and the observed process in practice.
The correct answer is “perform a detailed comparison between the documented cash receipts process and the observed process in practice.” To achieve this reconciliation, Sarah must compare what is supposed to happen (as documented in the procedures) with what is happening in practice.
The other answer choices are incorrect:
“Conduct an end-to-end review of the flow of information from lead capturing through to the invoicing stage”: This is relevant but addresses a broader process, not specifically the cash receipts reconciliation.
“Ensure that invoices are generated and authorized for all sales transactions per standard procedures”: This pertains to generating invoices, not reconciling cash receipts, which involves receiving payments.
“Recommend changes to the cash receipts process without conducting a comprehensive analysis”: This suggests making recommendations without the necessary analysis, which is essential for effective reconciliation.
Reconciling AIS Practice
Relevant Terms
Documentation
Reference
7112.20
7112.21
