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Flashcards in B4-1 Deck (40):
1

Which one of the following statements about an accounting information system (AIS) is incorrect?

a.

An AIS supports day-to-day operations by collecting and storing data about an organization's transactions.

b.

An AIS is often referred to as a transaction processing system.

c.

The information produced by AIS is made available to all levels of management for use in planning and controlling an organization's activities.

d.

An AIS is best suited to solve problems where there is great uncertainty and ill-defined reporting requirements.

Choice "d" is correct. An AIS is best suited to solve problems where there is certainty and clearly defined reporting requirements.

Choices "a", "c", and "b" are incorrect. All are correct statements regarding an AIS.

2

Which of the following statements is (are) correct for transaction processing modes?

I.

In batch processing, the grandfather-father-son file rotation procedure can be used either to recover from processing problems or to retain files off-site for disaster recovery.

II.

Batch totals, often used in batch processing, are totals of dollar fields in transactions. The total computed from the batch is compared to an input batch total for the batch of transactions; if the two totals are the same, processing of the batch can continue.

III.

Hash totals, often used in batch processing, are totals of fields in transactions other than dollars. The total computed from the batch is compared to an input hash total for the batch of transactions; if the two totals are the same, processing of the batch can continue.

IV.

In the past, batch processing predominated. These days, there is no justification for batch processing.

a.

II and III only are correct.

b.

I and IV only are correct.

c.

I and III only are correct.

d.

I, II, and III are correct.

 

Choice "d" is correct.

All of the statements other than IV are correct. In the past, batch processing predominated. These days, a much larger portion of system processing is on-line rather than batch, but batch processing is still often used for system to system transfers of data, updating separate data warehouses, and the like.

3

What statement best describes some of the general characteristics of Accounting Information Systems?

a.

AIS systems can only handle large volumes of identical transactions.

b.

All AIS systems are uniform since all businesses must deal with the same issues.

c.

AIS systems generally have similar capabilities; however, the applications implemented for a particular business are generally modified to meet the specific needs of that business.

d.

AIS systems cannot handle nonrecurring transactions.

Choice "c" is correct. An AIS is customized to the needs of a particular business or enterprise. The requirements of a manufacturer (including inventory and production) will be different from the requirements of a service firm that might not have any inventory.

Choice "b" is incorrect. AIS systems likely have similar capabilities, but the extent to which they are implemented will vary based on the requirements of the specific business.

Choice "a" is incorrect. An AIS can typically handle any transaction it is set up for. However, many AIS are set up to handle a large volume of transactions.

Choice "d" is incorrect. Nonrecurring transactions can be accommodated by an AIS. Typically, the initial organization of the business, debt issuance, capital outlay, etc., represent types of nonrecurring transactions that should be easily handled by an AIS.

4

A training organization is conducting a survey regarding students and instructors who participated in particular training seminars over the period Year 1 to Year 4. A report is generated that provides this information. This report is an example of:

a.

An exception report.

b.

A periodic scheduled report.

c.

A push report.

d.

An ad hoc report.

Choice ''d'' is correct. An ad hoc report is one that is created on demand generally to meet unique specifications that respond to a specific requirement (e.g., a survey). A well-designed database system (a database system is assumed in this question) should be able to produce this type of ad hoc report when required.

Choice ''a'' is incorrect. An exception report is produced when a specific condition or ''exception'' occurs. There is no such condition in this case.

Choice ''b'' is incorrect. A periodic scheduled report is a traditional report that displays information in a predefined format and that is made available on a regular basis. The report above is a specialized report that would not be considered ''traditional.''

Choice ''c'' is incorrect. A push report is a report that is ''pushed'' to a computer screen or desktop. It is typically a report that is needed regularly, possibly because the data that is being reported changes often.

5

A report that does not currently exist but that needs to be created on demand without having to get a software developer involved is known as a/an:

a.

Exception report.

b.

Demand report.

c.

Ad hoc report.

d.

Scheduled report.

 

Choice "c" is correct. An ad hoc report is a report that does not currently exist but that needs to be created on demand without having to get a software developer involved.

Choice "b" is incorrect. A demand report is a specific report that can be printed or viewed on demand.

Choice "a" is incorrect. An exception report is a report produced when a specific condition or "exception" occurs.

Choice "d" is incorrect. Scheduled reports are the more traditional reports that display information in a predefined format and that are made available on a regular basis.

6

Transaction processing typically includes all the following major functions except:

a.

Data input

b.

Information output

c.

Data storage

d.

Data analysis

Choice "d" is correct. Analysis of data is not a major function of transaction processing. Analysis is typically performed subsequent to transaction processing.

Choice "a" is incorrect. Data input is a major function of transaction processing along with data storage, data processing, and information output.

Choice "b" is incorrect. Information output is a major function of transaction processing along with data input, data storage, and data processing.

Choice "c" is incorrect. Data storage is a major function of transaction processing along with data input, data processing, and information output.

7

Which of the following terms represents the processing of large numbers of common business events that are processed in a predefined highly structured way?

a.

Data processing

b.

Information and communication

c.

Transaction processing

d.

Transaction controls

Choice "c" is correct. Transaction processing is the term used to describe processing large numbers of commonly occurring business events in a predefined, highly structured way. Common transaction processing systems include sales, cash receipts, accounts payable, etc.

Choice "a" is incorrect. The processing of data is part of transaction processing.

Choice "d" is incorrect. Transaction controls is not a term that describes the processing of business events. Transaction controls include policies and procedures used to safeguard assets, ensure accurate reporting, etc.

Choice "b" is incorrect. Information and communication is an element of the control grid described by the COSO and describes the efforts of an entity to capture information that will provide feedback on the effectiveness of controls.

8

The general characteristic of transactions processed within individual transaction cycles is that:

a.

Transactions are numerous but are generally similar and processed nearly identically.

b.

Transactions are few, generally dissimilar but processed identically.

c.

Transactions are numerous, generally similar but are processed in a variety of different ways.

d.

Transactions are numerous and vary widely in variety and type.

 

Choice "a" is correct. Transaction cycles generally capture commonly occuring transactions (e.g., customer orders) and process them repeatedly in a nearly identical fashion. Transaction cycles are established to organize and process data in an efficient manner.

Choice "d" is incorrect. Transaction cycles group transactions because they are similar in nature and have similar processing requirements. For example, most sales are processed in the same way for a particular business.

Choice "c" is incorrect. Transaction cycles are typically identified as a means of promoting processing efficiency. Transactions are processed in nearly identical ways.

Choice "b" is incorrect. Custom transactions may be identified within revenue cycles, however, they would be processed individually and specifically (e.g., establishing capital accounts for owners and borrowing funds for capital expansion would be handled individually).

9

A distributed processing environment would be most beneficial in which of the following situations?

a.

Large volumes of data are generated centrally and fast access is not required.

b.

Large volumes of data are generated at many locations and fast access is required.

c.

Small volumes of data are generated at many locations, fast access is required, and summaries of the data are needed promptly at a central site.

d.

Small volumes of data are generated centrally, fast access is required, and summaries are needed monthly at many locations.

Choice "b" is correct. A distributed (or decentralized) processing environment would be the most beneficial when large volumes of data are generated at many (remote) locations and fast access to the data is required. In centralized processing, there is always some delay (however small these days) in transmitting large volumes of data or transactions to the central site to be processed and then to be able to access the processed information. Decentralized processing eliminates that particular problem (although it does present other problems). Note that there seems to be an implied assumption in this question that the (remote) locations need access only to their own local data and not to all of the data for all locations. This choice seems to be better than choice "c".

Choice "a" is incorrect. If large volumes of data are generated centrally, centralized processing would probably be more beneficial, regardless of whether or not fast access to that data is required. This choice implies that little, if any, data or transactions are generated at the remote locations so there would be no real need for distributed processing.

Choice "c" is incorrect. If summaries of the data are needed "promptly" at the central site, centralized processing MIGHT be more beneficial. Since only small volumes of data are generated at the remote locations, there would probably not be much delay in transmitting that data to the central location and probably not much delay in accessing that data. Since only summaries of the data are needed at the central location, those summaries could probably be readily prepared at the remote locations. This choice is the next best, and a case could certainly be made that the choice is correct. The decision could readily come down to summaries of "what" data. Is it summaries of all of the data generated by all locations or summaries of only the data generated by the remote location? If the former is what is meant, centralized processing would be more beneficial. If the latter is what is meant, distributed processing would probably be more beneficial.

Choice "d" is incorrect. If summaries of the data are needed "monthly" at the remote sites, centralized processing MIGHT be more beneficial. However, there is no way to tell in this choice how much data is generated at the remote locations. From the way the question in total is written, an assumption might be made that there is only a small volume of data at the remote locations. If there is a large volume of data at the remote locations, decentralized processing might be more beneficial because fast access is required.
Note: This question is rather vague and ambiguous. Candidates should not have to make too many assumptions or read too much into the question. Unfortunately, with this question, you do.

10

Credit Card International developed a management reporting software package that enables members to interactively query a data warehouse and drill down into transaction and trend information via various network set-ups. What type of management reporting system has Credit Card International developed?

a.

On-line analytical processing system.

b.

On-line executive information system.

c.

On-line transaction-processing system.

d.

On-line information storage system.

Choice "a" is correct. Online analytical processing allows end users to retrieve data from a system and perform analysis using statistical and graphical tools. A credit card company's system that enables members to interactively query a data warehouse and drill down into transaction and trend information is an online analytical processing system.

Choice "c" is incorrect. On line transaction processing systems would process customer payments or other transactions, not analyze data.

Choice "b" is incorrect. On line executive information systems would likely provide strategic level information to company leadership, not analytical data to managers.

Choice "d" is incorrect. On line information storage systems would likely provide information storage services (e.g., lists of charges by month, etc.) for later retrieval by users without the analytical tools used by an online analytical processing system.

11

Which of the following errors most likely would be detected by batch financial totals?

a.

A transposition error on one employee's paycheck on a weekly payroll run.

b.

A purchase order mistakenly entered into two different batches.

c.

A missing digit in an invoice number in a batch of daily sales.

d.

Malfeasance resulting from a receivable clerk's pocketing of a customer's payment and altering of the related records.

Choice "a" is correct. As part of batch processing, a manual total will be calculated for each transaction file and compared to a computer-generated batch control total. Any financial discrepancies (such as an error on an employee paycheck) will be identified and resolved as part of this process.

Choice "c" is incorrect. Batch financial totals would not capture missing digits on invoice numbers.

Choice "b" is incorrect. A company should have other controls in place to prevent this, as a batch financial total is only designed to ensure that what is in the purchase order itself is appropriately reconciled to the computer-generated control total.

Choice "d" is incorrect. A company should have other controls in place to ensure that all payments received are accounted for appropriately, as batch controls would not necessarily catch this activity.

12

Avon Corporation has a management information system. From the management information system, several different reports are available, including reports that are monthly budget vs. actual reports, reports that highlight where sales representatives have not met their assigned sales quotas, account analysis reports that can be requested by accountants as needed as a part of the closing process, and reports that are created by end users to obtain information as needed at any time during the month. The 4 types of reports are best described as:

a.

Scheduled reports, ad hoc reports, exception reports, and demand reports.

b.

Exception reports, scheduled reports, demand reports, and ad hoc reports.

c.

Scheduled reports, exception reports, demand reports, and ad hoc reports.

d.

Demand reports, scheduled reports, exception reports, and ad hoc reports.

 

Choice "c" is correct. Monthly reports of budget vs. actual data are normally called scheduled reports that are produced without anybody having to request them. Reports that highlight sales representatives not having met their assigned sales quotas are normally called exception reports. Reports that analyze accounts, or that provide other specific and non-changeable information, but only on demand, are normally called demand reports. Reports that provide information as requested by the end user, and are available on demand, are normally called ad hoc reports.
Note that these names are generic names.

Choices "d", "a", and "b" are incorrect, per the above descriptions.

13

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

a.

Cash receipts.

b.

Inventory subsidiary.

c.

Payroll transactions.

d.

Cash disbursements.

 

Choice "b" is correct. The question can be readily addressed by using the "odd man out" principle. Just look at the other three choices. Each of them is a transaction file of some type; one of them is even called a transaction file. The other two (cash disbursements and cash receipts) are both transactions in a non-computerized accounting system and are transaction files in a computerized accounting system.

Choices "d", "a", and "c" are incorrect, per the above explanation.

14

Abbie mails her phone bill in every month with a remittance advice to the phone company. The remittance advice includes machine readable code that automates the input of the receipt. The remittance advice is sometimes referred with the following term:

a.

Sales order.

b.

Turnaround document.

c.

Echo check.

d.

Data processing.

Choice "b" is correct. Machine readable companion documents such as the remittance advice that goes with various bill payments are referred to as turnaround documents. These documents improve data input efficiency.

Choice "c" is incorrect. Echo checks are hardware devices that verify transmissions.

Choice "a" is incorrect. The remittance advice is not a sales order.

Choice "d" is incorrect. Data processing involves the treatment of the data input and does not describe the remittance advice.

15

An accounts payable clerk is accused of making unauthorized changes to previous payments to a vendor. Proof could be uncovered in which of the following places?

a.

Error files.

b.

Transaction logs.

c.

Error reports.

d.

Validated data file.

Choice "b" is correct. Transaction logs would include all transactions, including payments made to a vendor, that have been processed against the master files. Since any changes to vendor accounts would have to be applied by a transaction, the transaction logs would reflect incorrectly applied adjustments as well as the original correct transactions. The logs would also include the identification of the individual who authorized the transaction.

Choice "c" is incorrect. Error reports normally indicate transactions that contained some kind of error. If the accounts payable clerk were careful and made no errors, nothing about the unauthorized transactions would show up on error reports.

Choice "a" is incorrect. Errors are not always maintained on files and thus there are often no error files. Errors are meant to be corrected and then the correct transactions processed. If error reports are produced, they are often discarded once the errors have been corrected. Again, if the accounts payable clerk were careful, nothing about the unauthorized transactions would show up on any error files that were actually generated or maintained.

Choice "d" is incorrect. The validated transaction file would contain all transactions that have been edited and checked for processing. Since all transactions in the file would be assumed to be valid, the file might not include the identity of the individual who authorized each transaction since that information would be store in the transaction log.

16

What is the correct ascending hierarchy of data in a system?

a.

Field, record, file, character.

b.

Character, record, file, field.

c.

Character, field, record, file.

d.

Field, character, file, record.

 

Choice "c" is correct. The hierarchy of data in a system begins with the smallest component of data and ends with the most summarized. A character is a symbol such as a letter or number. A field is a collection of numbers or letters such as a name or a street address. A record is a group of fields such as a customer name and address and related accounts receivable amount. A file is a collection of records such as an account receivable subsidiary ledger.

Choice "b" is incorrect. A field is a combination of characters and would be second and not last on the hierarchy.

Choice "d" is incorrect. Character and field and record and file have been transposed in the answer provided. The correct hierarchy begins with the smallest component of data, the character in this instance and ends with a file in this case.

Choice "a" is incorrect. The hierarchy incorrectly reverses and jumbles the sequence of data as per explanation above.

17

The fixed assets and related depreciation of a company are currently tracked on a password-protected spreadsheet. The information technology governance committee is designing a new enterprise-wide system and needs to determine whether the current fixed asset process should be included because the current system seems to be working properly. What long-term solution should the committee recommend?

a.

Continuing to use the current spreadsheet process because there have been noissues in this area.

b.

Adopting the fixed-asset module of the new system for integration.

c.

Developing a new fixed asset system to manage the assets and related depreciation.

d.

Purchasing a stand-alone fixed asset program for managing the assets and related depreciation.

Choice "b" is correct. Adopting a fully integrated fixed asset module meets the stated needs identified by the information technology governance committee for a new enterprise-wide system. The stand-alone or spreadsheet-based systems suggested by other alternatives do not interface with enterprise-wide data processing as well as an integrated module and would likely not be recommended.

Choice "a" is incorrect. The continued use of the legacy spreadsheet-based system does not meet the identified needs of the company because it does not interface with enterprise-wide data processing as well as an integrated module would interface.

Choice "c" is incorrect. Development of a new fixed asset system does not meet the identified needs of the company because it does not interface with enterprise-wide data processing as well as an integrated module.

Choice "d" is incorrect. Purchasing a stand-alone fixed asset system does not meet the identified needs of the company because it does not interface with enterprise-wide data processing as well as an integrated module.

18

Which of the following terms best describes a payroll system?

a.

Enterprise resource planning (ERP) system.

b.

Decision support system (DSS).

c.

Database management system (DBMS).

d.

Transaction processing system (TPS).

Choice "d" is correct. A payroll system is a transaction processing system. It may use a database management system to store its data (the data has to go somewhere), but it is not a database management system.

Choice "c" is incorrect. A database management system is a system that is used by other systems to store and manage data, not an application system itself. All of these other systems more than likely use a DBMS as a repository of the data. A database management system is a tool.

Choice "b" is incorrect. A decision support system is a system that provides interactive support during the decision making process. A payroll system is not a decision support system, although it is certainly possible that a payroll systemmight have some decision support capabilities (to support decisions in the payroll area).

Choice "a" is incorrect. An enterprise resource planning system is a cross-functional enterprise system that integrates and automates the many business processes that must work together in the manufacturing, logistics, distribution, accounting, finance, and human resource functions of a business. A payroll system might be a part of the human resources part of an ERP (most ERP systems are combinations of other systems), but it is certainly not an ERP system by itself.

19

In which of the following types of businesses would it be most appropriate to use a batch processing system rather than an on-line, real-time (OLRT) system?

a.

An airline.

b.

A car repair company.

c.

A theatre.

d.

A rental car company.

 

Choice ''b'' is correct. Batch processing of transactions will likely meet the data processing needs for a car repair company. Unique repairs would be performed, costs would be accumulated and then services would be billed during a distinct period when the vehicle is dropped off to the repair shop and returned to the owner. Batch processing will be adequate since it will normally not be necessary to have every transaction immediately recorded in the system as it occurs.

Choices ''a'', ''c'', and ''d'' are incorrect. High volume businesses with multiple transactions that may originate from remote sites normally need an on-line real-time (OLRT) system to support their operations. In the three responses representing incorrect responses, OLRT is required since the same airline seat, theatre seat, or car cannot be sold/rented more than once at a simultaneous instant. Once the product has been sold/rented, the records must be immediately updated to reflect that. OLRT systems meet those needs.

20

Computer generated checks and purchase requisitions represent data outputs that are generically referred to as:

a.

Operational work product.

b.

Reports.

c.

Standard queries.

d.

Documents.

Choice "d" is correct. Hard copy data outputs such as checks and purchase requisitions that are used for business operations are generally referred to as documents.

Choice "b" is incorrect. Reports generally represent summary information (such as financial statements), not individual documents.

Choice "c" is incorrect. Queries are frequently on-demand responses to data inquiries on line. Frequently, no hard copy document is produced with a query.

Choice "a" is incorrect. Operational work product is a distracter. No such generic term is used.

21

Compared to online real-time processing, batch processing has which of the following disadvantages?

a.

Additional personnel are required.

b.

Additional computing resources are required.

c.

A greater level of control is necessary.

d.

Stored data are current only after the update process.

 

Choice "d" is correct. Batch processing means that transactions are processed in batches on a periodic basis. Because the transactions are processed on a periodic basis, the data that is being updated can only be considered current just after the update. At any other time, it is possible that a transaction has occured that would affect the data.

Choice "c" is incorrect. There is no greater level of control necessary for batch processing versus online real-time (online) processing.

Choice "b" is incorrect. There is nothing that says that additional computing resources are required for batch processing versus online processing. In fact, online processing normally requires more computing resources, which is one reason why online processing has become popular once computing resources became cheaper and thus more available.

Choice "a" is incorrect. There is nothing that says that additional personnel are required for batch processing versus online processing. Besides, a question could reasonably be asked, "Additional personnel to do what?"

22

Compared to batch processing, real-time processing has which of the following advantages?

a.

Timeliness of information.

b.

Efficiency of processing.

c.

Ease of implementation.

d.

Ease of auditing.

Choice "a" is correct. Compared to batch processing, real-time processing has the advantage of timeliness of information because data is processed and records updated immediately when a transaction is entered.

Choice "d" is incorrect. Auditing is normally easier with a batch system than with an online system. With an online system, it is harder, although certainly not impossible, to build effective audit trails. With less effective audit trails, it is more difficult to audit, and sometimes considerably different approaches to auditing (auditing around a system instead of auditing through a system) must be taken.

Choice "c" is incorrect. A batch system would normally be easier to implement than an online, real-time system. In a batch system, transactions would be sorted in master file order and then be processed against the master file in a single run. In an online, real-time system, each transaction is processed as it occurs so there must be controls in place to prevent transaction update conflicts when more that one transaction is trying to access a single master file. There are other complexities that would make an online, real-time system more difficult to implement than a batch system.

Choice "b" is incorrect. In general, a batch processing system is more efficient in processing large volumes of transactions than an online, real-time system. In batch processing, records are sorted in master file order to facilitate more efficient processing. In online, real-time processing, as each transaction is entered, the appropriate master file must be located and updated. The transactions would not occur in master file sequence so large volumes of transactions would usually be less efficient to process in online, real-time than in a batch processing system.

23

Which of the following is an open, royalty free standard that can be used to facilitate data aggregation, transfer, and connectivity between disparate or stand-alone systems?

a.

CAT5.

b.

HTTP.

c.

XBRL.

d.

Linux.

Choice "c" is correct. XBRL, the acronym for eXtensible Business Reporting Language, is derived from XML (eXtensible markup language). XBRL is an open, royalty-free, Internet-based information standard for business reporting of all kinds. XBRL labels data so that they are provided with context that remains with them and brings conformity to the names by which they are recognized by disparate software.

Choice "d" is incorrect. Linux is an operating system that serves as a platform for various applications, not a basis for data aggregation, transfer, etc.

Choice "b" is incorrect. Hypertext Transfer Protocol (HTTP) is the communications protocol used to transfer web pages on the World Wide Web.

Choice "a" is incorrect. CAT5 is a hardware/communications term that refers to transmission media.

24

A new company is trying to decide between setting up a centralized processing system and a decentralized processing system. All of the following are disadvantages of a centralized processing system that the company should consider when making the decision, except:

a.

Processing can be inconsistent.

b.

There are increased processing power and data storage needs at the central location.

c.

There can be a reduction in local accountability.

d.

Input/output bottlenecks can occur at high traffic times.

Choice "a" is correct. An advantage of a centralized processing system is that processing is consistent because it is all handled at the central location.

Choice "b" is incorrect. A disadvantage of a centralized processing system is that there is a need for increased processing power and data storage at the central location because all processing must be done at the centralized location.

Choice "c" is incorrect. A disadvantage of a centralized processing system is that there can be a reduction in local accountability because all processing is handled at a central location. Local users have little responsibility and thus would not be accountable for processing errors..

Choice "d" is incorrect. A disadvantage of a centralized processing system is that there can be input/output bottlenecks at high traffic times.

25

Which of the following attributes of a management report has the greatest impact on management's ability to make effective decisions?

a.

Summarization.

b.

Conciseness.

c.

Relevance.

d.

Exception orientation.

 

Choice "c" is correct. Relevance defines that quality of data and information that makes a difference in decision making. Relevance has the greatest impact on management's ability to make effective decisions.

Choice "a" is incorrect. Summarization purely represents the aggregation of data and does not, alone, create reporting value. Data not summarized may be relevant and important to decisions.

Choice "d" is incorrect. The exception orientation of reporting focuses management on unusual items but does not have the same impact as relevance. Relevant data may include information that does not constitute an exception.

Choice "b" is incorrect. Concise reporting should be faster to read, but concise reporting alone will not impact effective decisions to the same degree as presentation of relevant data.

26

What type of computerized data processing system would be most appropriate for a company that is opening a new retail location?

a.

Batch processing.

b.

Sequential-file processing.

c.

Real-time processing.

d.

Direct-access processing.

Choice "c" is correct. In this question, a new "retail" location is being opened. Retail locations will normally have a large number of small transactions (think of a convenience store selling beer and chips), and that might make batch processing look to be most appropriate. However, it is important to know the current status of inventory so that inventory (what is and what is not selling) can be properly replenished (think of Walmart and its supply chain systems) and so that quick price reductions can be made for inventory that is not selling. This last factor makes real-time processing most appropriate. 

Choice "a" is incorrect. There is nothing wrong with batch processing, but batch processing would probably not be used these days in the situation described in the question. In the past, batch processing was used to upload transaction data from individual stores to the retailer's centralized processors (with the remainder of the processing being done centrally and possibly in batch); however, real time processing would be better (and more expensive). This kind of decision is almost always a cost/benefit decision. It would certainly be possible, in this situation, to have the retail store transactions uploaded after the close of business in batch, further processing of the transactions to be done centrally in batch, and new inventory figures transmitted back to the store in batch after the central processing is complete.

Choice "b" is incorrect. Sequential file processing is almost totally restricted to batch processing. Before direct access media were available at a reasonable cost, sequential file processing was used extensively. Tapes (which are commonly used for sequential files) are normally restricted to backups and storage for very large amounts of data that are too expensive to be stored on disk and for which there is no real need for relatively quick access.

Choice "d" is incorrect. Direct access processing is not a term used to describe a processing method. Direct access refers to the method of accessing data on a storage medium. Direct access means that you can go directly to a location on a storage device without reading through all of the data as would be necessary in sequential access.

27

Which of the following are components of a Business Information System (BIS)?

a.

Hardware, software, and reports.

b.

Software, reports, data, and networks.

c.

Hardware, software, network, people, and data.

d.

Queries, data, reports, and people.

Choice "c" is correct. "Business information system" is a general term for information technology that includes hardware, software, networks, people, and data.

Choice "a" is incorrect. Reports are not considered one of the components of BIS. The list in this proposed answer is also incomplete making "c" the best answer.

Choice "b" is incorrect. Reports are not considered one of the components of BIS. The list in this proposed answer is also incomplete making "c" the best answer.

Choice "d" is incorrect. Reports and queries are not considered one of the components of BIS. The list in this proposed answer is also incomplete making "c" the best answer.

28

Data processing methods are generally described as either batch or online real-time processing (OLRT). These data processing methods are distinguished by the timing of:

a.

Data creation.

b.

Data updating.

c.

Data reading.

d.

Data deletion.

Choice "b" is correct. Batch processing updates data periodically (when a batch is processed) while on-line real time processing updates data immediately when transactions are entered.

Choice "a" is incorrect. Data creation may happen at any time for either batch or on-line processing. Those methods are distinguished by the timing of data updating. 

Choice "c" is incorrect. Data reading may happen at any time for either batch or on-line processing. Those methods are distinguished by the timing of data updating. 

Choice "d" is incorrect. Data deletion or purging may happen at any time for either batch or on-line processing. Those methods are distinguished by the timing of data updating.

29

Security Federated Insurance Company numbers its insurance policies with a 10 character code that identifies the type of property or casualty insurance sold, the policy year, the customer type, and a customer number. Numbering of this character is an example of:

a.

Sequential code.

b.

Object code.

c.

Block code.

d.

Group code.

Choice "d" is correct. Group coding embeds intelligence into the identification numbers associated with a particular item. The identification of different features of an insurance policy with specific numbering scheme is an example of group coding.

Choice "a" is incorrect. Sequential coding purely numbers documents, transactions, or other items in order (sequence). Insurance policy number of the type described is not sequential coding.

Choice "c" is incorrect. Block coding represents assignment of blocks of numbers to broad categories of items (e.g., a general ledger chart of accounts that assigns assets to the 1,000 series of account numbers, liabilities to the 2,000 series, etc.).

Choice "b" is incorrect. The object code is created by a compiler and represents the intermediate instruction that takes programming source code and translates it into machine language. This response is a distracter.

30

Business Information Systems (BIS) allow a business to perform the following functions on data:

a.

Initiate, process, distribute, transform, and store.

b.

Distribute, collect, report, and transform.

c.

Process, report, and store.

d.

Collect, process, store, transform, and distribute.

 

Choice "d" is correct. Business Information Systems allow a business to perform the following functions on data: collect, process, store, transform, and distribute.

Choice "b" is incorrect. Report is not a function performed on data and store is not the only functions performed on data by a BIS.

Choice "c" is incorrect. Report is not a function performed on data and process and store are not the only functions performed on data by a BIS.

Choice "a" is incorrect. Data initiation is not a function performed by BIS. Data processing, distribution, transformation, and storage are not the only functions performed on data by a BIS.

31

An employee mistakenly enters April 31 in the date field. Which of the following programmed edit checks offers the best solution for detecting this error?

a.

Reasonableness.

b.

Online prompting.

c.

Mathematical accuracy.

d.

Preformatted screen.

Choice "a" is correct. The only programmed edit checks in the choices are reasonableness checks and edits for mathematically accuracy. Obviously, April does not have 31 days. A check on this kind of data entry would be easy to implement and is standard. 

Choice "b" is incorrect. Online prompting is not really a programmed edit check. Online prompting might assist in accurate data entry, however. Anything that makes data entry easier will help accuracy.

Choice "c" is incorrect. A test for mathematical accuracy is a programmed edit check. However, there are no mathematics in a date such as April 31.

Choice "d" is incorrect. A preformatted screen is not really a programmed edit check. A preformatted screen might assist in accurate data entry, however. Anything that makes data entry easier will help accuracy.

32

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.

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

b.

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

c.

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

d.

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

Choice "a" is correct. With batch processing, input documents/transactions are collected and grouped by type of transaction. These groups (called batches) are processed periodically (e.g., daily, weekly, monthly, etc.).

Example: A payroll system might use batch processing. Time sheets are batched in groups (batches), and input as single transactions. The individual transactions are then posted to a payroll record for tax and financial reporting.

Choices "c" and "d" are incorrect. Batch processing presumes grouping before posting. Posting upon entry is a characteristic of online real time processing. 

Choice "d" is incorrect. Batch processing presumes grouping before posting. Posting upon entry is a characteristic of online real time processing. 

Choice "b" is incorrect. Each transaction has its own line entry in the appropriate ledger and not a cumulative entry total. Transactions might be sorted by and regrouped by account for summary entry to various ledgers, but individual transactions maintain their identity.

33

Concepts of computer storage define a logical sequence of smaller to larger components of stored data that would most likely be displayed as follows:

a.

Records are organized into databases that are filed into fields.

b.

Files are organized into records in fields of databases.

c.

Databases are organized within fields of records and files.

d.

Fields comprise records that are organized into files that create databases.

 

Choice "d" is correct. Fields (such as first name, last name) comprise records (such as customer or employee) that are organized into files (such as accounts receivable accounts) that create data bases (such as customer contact listings and accounts receivable subsidiaries).

Choice "c" is incorrect. Databases are the broadest form of data storage while fields are the narrowest. Databases are not organized into fields. Fields are the building blocks of databases.

Choice "b" is incorrect. Records are organized into files. Fields of databases is a distracter.

Choice "a" is incorrect. Databases represent an organization of files that are comprised of records. Fields represent the first and not the last phase of computer storage.

34

Which of the following statements is (are) correct for data?

I.

Production and test data are normally stored together in the same databases.

II.

Production and test data are normally stored separately, with the production data stored in production databases and the test data stored in test databases.

III.

Access to production and test data are normally the same.

a.

II only is correct.

b.

None of the listed statements is correct.

c.

II and III only are correct.

d.

I and III only are correct.

Choice "a" is correct.

Production data and test data are normally stored separately, with the production data stored in production databases and the test data stored in test databases.

Only personnel with a need to access production data should have access to that data. Access to test data can be considerably more open.

Choices "d", "c", and "b" are incorrect, per the explanation above.

35

Mill Co. uses a batch processing method to process its sales transactions. Data on Mill's sales transaction tape are electronically sorted by customer number and are subjected to programmed edit checks in preparing its invoices, sales journals, and updated customer account balances. One of the direct outputs of the creation of this tape most likely would be a:

a.

Printout of the updated inventory records.

b.

Report showing overdue accounts receivable.

c.

Report showing exceptions and control totals.

d.

Printout of the sales price master file.

Choice "c" is correct. In a batch processing system, one of the data input controls would be a report showing exceptions and a control total for all invoices processed in each batch.

Choice "a" is incorrect. There would be no printout of the updated inventory records because the batch has not been processed and the inventory records are not updated when the tape is created.

Choice "b" is incorrect. When the tape is created, the batch has not been processed, so sales have not been posted to the accounts receivable ledger. There would be no report showing overdue accounts receivable.

Choice "d" is incorrect. The sales price master file is not a direct output of the tape.

36

Which of the following tasks would be included in a document flowchart for processing cash receipts?

a.

Record returns and allowances.

b.

Compare control and remittance totals.

c.

Authorize and generate an invoice.

d.

Authorize and generate a voucher.

Choice "b" is correct. A task (a box on a document or system flowchart) to compare control totals and remittance totals would be included in the processing of cash receipts. Note that this is a very general step that could appear on almost any document flowchart. All of the other choices in this question are specific to a particular type of processing. 

Choice "a" is incorrect. Recording returns and allowances would not be included in the processing of cash receipts. Anything returned will not be received in cash. Returns and allowances would be included in the processing (and thus the document flowchart) of sales. 

Choice "c" is incorrect. Authorizing and generating invoices would not be included in the processing of cash receipts. Invoices would be included in the processing of sales.

Choice "d" is incorrect. Authorizing and generating vouchers would not be included in the processing of cash receipts. Vouchers would be included in the processing of accounts payable and payments.

37

Place the following sequence of events in an AIS in the proper logical order:

I.

Trial balances are prepared.

II.

The transaction data from source documents is entered into the AIS by an end user.

III.

Financial reports are generated.

IV.

These transactions are recorded in the appropriate journal.

V.

The original paper source documents are filed.

VI.

The transactions are posted to the general and subsidiary ledgers.

a.

V, II, VI, IV, I, III.

b.

II, V, IV, VI, I, III.

c.

II, V, VI, IV, I, III.

d.

V, II, VI, IV, III, I.

 

Choice "b" is correct. The sequence of events in an AIS is as follows:

The transaction data from source documents is entered into the AIS by an end user (II).

The original paper source documents are filed (V).

These transactions are recorded in the appropriate journal (IV).

The transactions are posted to the general and subsidiary ledgers (VI).

Trial balances are prepared (I).

Financial reports are generated (III).

38

Which of the following technologies is specifically designed to make sharing financial information electronically more efficient and effective?

a.

Transmission control program/internet protocol (TCP/IP).

b.

Extensible business reporting language (XBRL).

c.

Hypertext transfer protocol (HTTP).

d.

Hypertext markup language (HTML).

Choice "b" is correct. Extensible business reporting language (XBRL) is specifically designed to exchange financial information electronically. It is a markup language that tags the items with metadata (data about the data). The SEC's Interactive Data Rule requires public companies to present financial statements and related exhibits with XBRL tags.

Choice "d" is incorrect. HTML is a markup language that tells a web browser how to display content. It does not define the data on the page, only how it is displayed. HTML tags are a limited defined set of tags used to format web pages.

Choice "c" is incorrect. HTTP is the general communications protocol used to transfer web pages on the World Wide Web. It was not specifically designed for financial data.

Choice "a" is incorrect. TCP/IP is the transmission protocol of the internet. TCP/IP was not specifically designed for financial data.

39

Which of the following transaction processing modes provides the most accurate and complete information for decision making?

a.

Online, real-time.

b.

Application.

c.

Batch.

d.

Distributed.

Choice "a" is correct. Online, Real-Time (OLRT) Processing is an immediate processing method in which each transaction goes through all processing steps (data entry, data validation, and master file update) before the next transaction is processed. OLRT files are always current, and error detection is immediate.

Choice "c" is incorrect. Batch processing is most often found in traditional high volume transaction processing systems, such as payroll or general ledger. Data may not be current except immediately after all batches have been run.,

Choice "d" is incorrect. Distributed is not a transaction processing mode. 

Choice "b" is incorrect. Application is not a transaction processing mode. It typically represents a type of program used by an end user.

40