B4-4 Flashcards Preview

BEC BECKER MCQ > B4-4 > Flashcards

Flashcards in B4-4 Deck (31):
1

An advantage of an e-commerce transaction over an EDI transaction is that e-commerce:

a.

Is generally less expensive than EDI.

b.

Requires that organizations enter a contract before transacting business.

c.

Is generally less secure than EDI.

d.

Is generally slower than EDI.

Choice "a" is correct. Since e-commerce transactions are usually conducted through the Internet, not a VAN, e-commerce transactions are less expensive than EDI transactions. This is true because a privately owned VAN is more expensive.

Choice "c" is incorrect. Choice "c" is a true statement but this is a disadvantage, not an advantage of e-commerce over EDI.

Choice "d" is incorrect. Choice "d" is a false statement because e-commerce transactions are usually conducted through the Internet, not a VAN, and therefore are executed in real time and not delayed in a batch file. This makes e-commerce transactions faster, not slower, than EDI transactions.

Choice "b" is incorrect. Choice "b" is a false statement because e-commerce transactions do not require that organizations enter a contract before transacting business; EDI transactions do.

2

In an e-commerce environment that requires that the information technology (IT) system be available on a continuous basis, more emphasis will be placed on which of the following aspects of the planning than in a traditional organization?

a.

Maintain redundant systems for instant availability to assure the flow of transactions.

b.

Review additional expenses to obtain the required amount of business interruption insurance coverage for the organization.

c.

Assure that appropriate data backups are stored in an off-site location.

d.

Maintain appropriate written source documents so the data can be re-entered if it is lost or compromised.

Choice "a" is correct. E-commerce environments are more highly dependent upon robust communications systems than traditional organizations to ensure continuous service. Maintenance of redundant systems for instant availability to assure the flow of transactions would require more emphasis in an e-commerce environment than a traditional organization.

Choice "d" is incorrect. Traditional systems will place more emphasis on written source documents to provide data redundancy than e-commerce environments.

Choice "b" is incorrect. Both traditional and e-commerce organizations will invest in business interruption insurance to ensure business survival.

Choice "c" is incorrect. Both traditional and e-commerce organizations will make appropriate arrangements for system backup and safeguarding of data.

3

In building an electronic data interchange (EDI) system, what process is used to determine which elements in the entity's computer system correspond to the standard data elements?

a.

Encryption.

b.

Translation.

c.

Decoding.

d.

Mapping.

Choice "d" is correct. Mapping is the process of determining the correspondence between elements in a company's terminology and elements in standard EDI terminology. Once the mapping has been completed, translation software can be developed to convert transactions from one format to the other.

Choice "b" is incorrect. Translation is the conversion of data from one format to another, such as from EDI format to an internal company format.

Choice "a" is incorrect. Encryption is the encoding of data for security purposes.

Choice "c" is incorrect. Decoding is the process used by the recipient of encoded information, whereby a "key" is used to decipher the message.

4

After a B2B transaction occurs, the area of management that is concerned with what goods were ordered, when and where the goods were to be delivered, and what the amount paid is:

a.

The Business Information Systems group.

b.

The Database Management group.

c.

The Supply Chain Management group.

d.

The Management Information System group.

 

Choice "c" is correct. Supply Chain Management (SCM) is concerned with four important characteristics for every sale: what, when and where the goods were delivered and how much the goods cost.

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

5

Accountants often access the website for the American Institute of Certified Public Accountants and order publications from that organization. As part of that process, they provide their name and address and a password establishing their identity and provide credit or debit card information to pay for goods purchased. Use of the Internet to effect purchases of this type is called:

a.

Electronic Data Interchange (EDI).

b.

E-Mail.

c.

Enterprise Resource Planning (ERP).

d.

E-Commerce.

Choice "d" is correct. Ordering goods or services over the Internet from a corporate website is an example of e-commerce.

Choice "a" is incorrect. Electronic Data Interchange (EDI) typically occurs between parties with a previous relationship normally over a privately owned value added network, not the Internet. However, use of the Internet for EDI is becoming more common.

Choice "b" is incorrect. E-mail is a form of electronic communication not necessarily a medium in which to transact exchange transactions.

Choice "c" is incorrect. This answer choice is a distractor.

6

Belwood International, located in the U.S., has just purchased goods over the Internet from a supplier, Silver Diamond, located in Europe. Belwood and Silver Diamond do business on a regular basis and Belwood is able to access Silver Diamond's database to check on stock availability and then place orders on-line. Belwood then pays for the purchases through an arrangement between Silver Diamond and Belwood's respective banks in Europe and the U.S. Silver Diamond and Belwood are involved in:

I.

B2C.

II.

EFT.

III.

B2B.

IV.

EDI.

a.

II and IV only.

b.

I and IV only.

c.

I and II only.

d.

II, III, and IV only.

 

Choice "d" is correct. Silver Diamond and Belwood are involved in Electronic Funds Transfer (EFT) as they make payments through their respective banks for their business-to-business transactions (B2B). They are involved in Electronic Data Interchange (EDI) because they are known to each other and one allows access by the other to their systems.

Choices "b", "c" and "a" are incorrect:

The correct choice should exclude B2C since this term relates to business-to-consumer, but this is not relevant here as both organizations are businesses.

The correct choice should include EFT. Silver Diamond and Belwood are involved in Electronic Funds Transfer as they make payments through their respective banks.

The correct choice should include B2B. Silver Diamond and Belwood are both business transacting business electronically.

The correct choice should include EDI. Silver Diamond and Belwood are involved in Electronic Data Interchange because they are known to each other and one allows access by the other to their systems.

7

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

a.

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

b.

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

c.

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

d.

Reduction in costs for implementation and training.

Choice "b" is correct. Enterprise Resource Planning (ERP) coordinates information to ensure timely and responsive reporting and data administration in support of decisions. An enterprise resource planning system is a cross-functional enterprise system that integrates and automates many business processes that work together in the manufacturing, logistics, distribution, accounting, finance, and human resource functions of a business. ERP software is comprised of a number of modules that can function independently or as an integrated system to allow data and information to be shared among all of the different departments and divisions of large businesses. 

Choice "c" is incorrect. ERP presumes modifications affect other modules. In fact, the coordination of modules and information is how ERP adds value.

Choice "a" is incorrect. ERP systems store information in a central repository so that data may be accessed and used by various departments.

Choice "d" is incorrect. Implementation and training would increase, not reduce cost.

8

Which of the following is usually a benefit of transmitting transactions in an electronic data interchange (EDI) environment?

a.

Automatic protection of information that has electronically left the entity.

b.

Assurance of the completeness of transaction data because of standardized controls.

c.

Elimination of the need to verify the receipt of goods before making payment.

d.

Elimination of the need to continuously update antivirus software.

Choice "b" is correct. One of the benefits of EDI is that transactions are transmitted in a standardized manner with the same controls at all times because the transmission is done by an application system instead of by a person (unless the application controls are changed in some manner). This would mean that transactions would only be transmitted if they contained complete information.

Choice "d" is incorrect. EDI does not have anything to do with antivirus software. It certainly does not eliminate the need to update antivirus software continuously; that need is still there. Virus software (actually the virus definitions, not necessarily the software itself) needs to be updated regularly; most anti-virus software vendors provide updated virus definitions on at least a weekly basis.

Choice "a" is incorrect. EDI has nothing to do with the automatic protection of information that has left the entity, electronically or in any other manner. Once data or information has left the entity, the entity can do nothing more to protect it. Any protection (such as encryption) would have to have been applied to the data or information before that data or information left the entity.

Choice "c" is incorrect. EDI does not have anything to do with the need to verify receipt of goods before making payment. Purchased goods should normally be received before payment is made (unless some kind of advance payment is being made). Once goods are received or payment is authorized by another means, the payment can be made, manually or by EDI, as appropriate.

9

Detroit Services Corporation provides services to various companies in the automotive industry. Detroit uses a CRM system. Which of the following statements is correct with respect to CRM systems?

a.

Both statements are correct.

b.

Neither statement is correct.

c.

CRM systems provide sales force automation and customer services.

d.

The objectives of CRM systems are to increase customer satisfaction and customer revenue.

Choice "a" is correct. Both statements are correct.

CRM systems provide sales force automation and customer services. CRM systems record and manage customer contacts, manage salespeople, forecast sales and sales targets and goals, manage sales leads and potential sales leads, provide and manage online quotes and product specifications and pricing, and analyze sales data. This statement is correct.

The objectives of CRM systems are to increase customer satisfaction and customer revenue. This statement is correct.

Choice "b" is incorrect, per the above explanation.

10

Which of the following allows customers to pay for goods or services from a web site while maintaining financial privacy?

a.

E-cash.

b.

Credit card.

c.

Electronic check.

d.

Site draft.

Choice "a" is correct. E-cash (also called digital cash) is currency in an electronic form that moves outside the normal channels of money. It maintains financial privacy just like real cash does. PayPal is a form of digital cash.

Choice "b" is incorrect. A credit card cannot be used to pay for goods or services while maintaining (complete) financial privacy. While a particular site may be very secure, the mere fact of presenting the credit card does not maintain financial privacy.

Choice "d" is incorrect. A "site draft" (which is actually a "sight draft" which means that it can be seen) is a draft, a negotiable instrument that is payable on demand. It does not maintain (complete) financial privacy any more than a check does.

Choice "c" is incorrect. An electronic check does not maintain financial privacy any more than a paper check does.

11

Electronic data interchange (EDI) is best described as:

a.

Computer-to-computer transactions for direct processing.

b.

An enterprise-wide database that stores data that has been extracted from other databases.

c.

A privately owned value added network.

d.

A Federal Reserve wire system used for electronic, computer-to-computer, money transfers.

Choice "a" is correct. By definition, EDI is the computer-to-computer exchange of business data in structured formats that allows direct processing of the data by the receiving system.

Choice "b" is incorrect. This accurately describes a data warehouse.

Choice "d" is incorrect. This accurately describes an electronic funds transfer.

Choice "c" is incorrect. EDI transactions may be transmitted using a VAN, but EDI is not a VAN by definition.

12

A research-based firm in the medical field could use each of the following Internet-based tools for collaboration, except:

a.

An e-mail application.

b.

Videoconferencing.

c.

Electronic data interchange.

d.

Groupware systems

Choice "c" is correct. Electronic data interchange (EDI) is a computer-to-computer exchange of business transaction documents. It is not a tool used specifically for collaboration between humans.

Choice "a" is incorrect. E-mail is certainly an appropriate Internet-based tool for collaboration.

Choice "b" is incorrect. Videoconferencing is a very effective Internet-based tool for communication and collaboration.

Choice "d" is incorrect. Groupware systems is another name for collaborative systems.

13

Engaging in traditional electronic data interchange (EDI) provides which of the following benefits?

a.

Guaranteed payments from customers.

b.

Reduced likelihood of stockout costs.

c.

Enhanced audit trails.

d.

Added flexibility to entice new partners.

 

Choice "b" is correct. EDI (electronic data interchange) is the exchange of business transaction documents from one computer to another. Because this exchange is significantly faster than paper exchanges, inventory can be reordered (and ultimately received) much faster than with traditional ordering systems. As a result, an inventory stockout becomes much less of a risk.

Choice "c" is incorrect. An EDI system does not automatically enhance audit trails. However, due to the risks associated with EDI (in particular, unauthorized access to organizational systems), enhanced audit trails becomes a critical requirement to have in place in order to effectively use EDI.

Choice "a" is incorrect. EDI does not guarantee payments from customers.

Choice "d" is incorrect. Because all transactions must be submitted in a standard format, EDI does not have the flexibility that other exchange formats may have.

14

Which of the following statements concerning Business-to-Business (B2B) transactions is/are correct?

I.

B2B commerce websites make purchasing decisions faster, simpler, and more cost effective because companies can do more research and transact business with many different vendors.

II.

B2B transactions are more secure than Business-to-Consumer (B2C) transactions because the government has policies and procedures to protect B2B transactions.

III.

B2B transactions occur electronically and are generally very reliable because computers are very precise and there is no opportunity for human error.

a.

I and II.

b.

I and III.

c.

II and III.

d.

I, II, and III.

 

Choice "b" is correct. Statements I and III are correct by definition. Statement II is incorrect. There are no government policies and procedures to protect B2B transactions.

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

15

Transactions between businesses are frequently handled through electronic media. Business to business transactions, often called B2B transactions, typically happen:

a.

Through Internet, EDI, intranets or extranets.

b.

Only through Internet sites.

c.

E-mail verified by certified postal delivery.

d.

Only through pre-established Electronic Data Interchange (EDI) protocols.

 

Choice "a" is correct. Business to business (B2B) transactions typically occur through any number of different networks including the Internet, private corporate intranets, extranets, or Electronic Data Interchange (EDI) arrangements.

Choice "d" is incorrect. B2B is not required to take place only through a single network such a private Value Added Network (VAN) established to effect Electronic Data Interchange (EDI).

Choice "b" is incorrect. B2B is not required to take place only through a single network such as an intranet.

Choice "c" is incorrect. Confirmation of business transactions typically occurs online and does not require or generally even use hard copy confirmations mailed through the United States Postal Service.

16

Which of the following characteristics distinguishes electronic data interchange (EDI) from other forms of electronic commerce?

a.

EDI transactions are formatted using strict standards that have been agreed to worldwide.

b.

EDI commerce is ordinarily conducted without establishing legally binding contracts between trading partners.

c.

The cost of sending EDI transactions using a value-added network (VAN) is less than the cost of using the Internet.

d.

Software maintenance contracts are unnecessary because translation software for EDI transactions need not be updated.

Choice "a" is correct. Electronic data interchange (EDI) (intercompany exchange of computer-processible business information) requires strict adherence to a standard data format. Translation software is required to convert internal company data to this format.

Choice "c" is incorrect. EDI can be accomplished using direct links between the trading partners, through communication intermediaries (called "service bureaus"), through value added networks (VANs), or over the Internet. Internet-based communication is the least expensive communications method.

Choice "d" is incorrect. Translation software is required in order to achieve the specified data format. Like all software, translation software will need to be updated as requirements change in order to follow changing conditions.

Choice "b" is incorrect. EDI is always accompanied by contracts, which specify the types of data to be exchanged, the rules governing transaction processing, and data and file security standards.

17

Which of the following characteristics distinguishes electronic data interchange (EDI) from other forms of electronic commerce?

a.

EDI transactions ordinarily are processed without the Internet.

b.

EDI transactions are formatted using one of several standards that are uniform worldwide.

c.

EDI transactions need not comply with generally accepted accounting principles.

d.

EDI transactions are usually recorded without security and privacy concerns.

Choice "b" is correct. EDI requires that all transactions be submitted in standard (by industry) data format. Possible standards include ANSI X.12, EDIFACT, and IPPAA as well as others.

Choice "c" is incorrect. Use of EDI does not reduce the need to comply with GAAP in recording transactions.

Choice "a" is incorrect. EDI is a computer-to-computer exchange of business data that often involves the use of the Internet.

Choice "d" is incorrect. The greatest risk regarding the use of EDI is the improper distribution of EDI transactions, so security and privacy concerns are of great importance.

18

An enterprise resource planning system is designed to:

a.

Present executives with the information needed to make strategic plans.

b.

Integrate data from all aspects of an organization's activities.

c.

Help with the decision-making process.

d.

Allow nonexperts to make decisions about a particular problem.

Choice "b" is correct. Enterprise resource planning (ERP) is designed to integrate data from all aspects of an organizations activity. ERP is defined as a cross-functional system that integrates and automates the many business processes that must work together in manufacturing, logistics, distribution, accounting, etc.

Choice "d" is incorrect. Although ERP systems can provide cross functional information across the organization to assist managers in decision making, the system assumes a high level of sophistication among users and does not automate decision making. The focus of ERP is cross functional information integration.

Choice "c" is incorrect. ERP provides integrated information that can assist with decision making; however, it is designed to automate the accumulation of cross functional information.

Choice "a" is incorrect. ERP is primarily meant to provide integrated information for operational managers, not strategic information to executives.

19

Which of the following represents an additional cost of transmitting business transactions by means of electronic data interchange (EDI) rather than in a traditional paper environment?

a.

Internal audit work is needed because the potential for random data entry errors is increased.

b.

Redundant data checks are needed to verify that individual EDI transactions are not recorded twice.

c.

Translation software is needed to convert transactions from the entity's internal format to a standard EDI format.

d.

More supervisory personnel are needed because the amount of data is greater in an EDI system.

Choice "c" is correct. Translation software is a required component in an EDI environment, and it represents an additional cost not incurred in the traditional paper environment.

Choice "b" is incorrect. Redundant data checks to verify that transactions are not recorded twice may be used in an EDI environment (especially if a VAN is used), but they are not specifically required. 

Choices "a" and "d" are incorrect. In an EDI environment, communication between trading partners is automated. Because the receiving company no longer has to manually input transaction data into its own internal computer system, data entry labor and the potential for errors are both reduced.

20

A manufacturing company that wanted to be able to place material orders more efficiently most likely would utilize which of the following?

a.

Electronic funds transfer.

b.

Automated clearinghouse.

c.

Electronic data interchange.

d.

Electronic check presentment.

 

Choice "c" is correct. A manufacturing company that wanted to be able to "place" material orders more efficiently would utilize EDI for placing those orders and also for other "paperwork" between the company and its vendors.

Choice "d" is incorrect. Electronic check presentment would be used for making payments and would not do anything with regard to the placing of orders.

Choice "b" is incorrect. An automated clearinghouse has to do with the automated clearing of checks and other payments. Again, it would be used for making payments and would not do anything with regard to the placing of orders.

Choice "a" is incorrect. Electronic funds transfer would again be used for making payments and would not do anything with regard to the placing of orders.

21

The communications network typically used to effect Electronic Data Interchange (EDI) between businesses is:

a.

A Value Added Network (VAN).

b.

A corporate intranet.

c.

The Internet.

d.

An extranet.

Choice "a" is correct. Electronic Data Interchange (EDI) is usually effected through a Value Added Network (VAN). However it can be effected through the Internet.

Choice "c" is incorrect. Electronic Data Interchange (EDI) is usually effected through a Value Added Network (VAN), not the Internet. However, EDI may be effected through the Internet.

Choice "b" is incorrect. Electronic Data Interchange (EDI) is usually effected through a Value Added Network (VAN), not a private corporate intranet.

Choice "d" is incorrect. Electronic Data Interchange (EDI) is usually effected through a Value Added Network (VAN), not an extranet.

22

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

a.

A decision support system.

b.

An executive support system.

c.

An office automation system.

d.

An enterprise resource planning system.

 

Choice "d" is correct. A system that integrates multiple functional areas in business operations is referred to as an enterprise resource planning system.

Choice "a" is incorrect. A decision support system or expert system provides operational support for different business circumstances and does not necessary integrate all functional areas within an organization.

Choice "b" is incorrect. An executive support system provides strategic support for executive decisions but does not necessarily integrate all functional areas within an organization.

Choice "c" is incorrect. An office automation system coordinates back office operations but does not integrate all functional areas within an organization.

23

Which of the following statements is true regarding Transmission Control Protocol and Internet Protocol (TCP/IP)?

a.

TCP/IP networks are limited to large mainframe computers.

b.

Every site connected to a TCP/IP network has a unique address.

c.

The actual physical connections among the various networks are limited to TCP/IP ports.

d.

Every TCP/IP-supported transmission is an exchange of funds.

Choice "b" is correct. TCP/IP is the network protocol upon which the Internet is based. Knowing only that, some or all of the incorrect choices can be readily eliminated. If nothing else, the odds of guessing correctly are improved. There is detail on TCP/IP in the B4 Technical Addendum; however, TCP/IP is not discussed in the main text. The "addresses" referenced in this choice refer to network addresses, which are unique. Network addresses are discussed in the B4 Technical Addendum also; they are not discussed in the main text.

Choice "d" is incorrect. TCP/IP is not limited to exchanges of funds. The Internet is used for a lot more than just exchanges of funds, although it is certainly used for that. Knowing only that TCP/IP is the basis for the Internet, and nothing else, this choice can be readily eliminated.

Choice "a" is incorrect. TCP/IP is not limited to large (or even small) mainframe computers. It can and is used by any type of computer. Knowing only that TCP/IP is the basis for the Internet, and nothing else, this choice can be readily eliminated.

Choice "c" is incorrect. The actual physical connections among the various networks are not limited to TCP/IP ports. There are plenty of other "ports" that are used for Internet communications. Ports are discussed in the B4 Technical Addendum; they are not discussed in the main text. This choice is probably the next best choice since it takes just a little more knowledge to eliminate it.

24

Which of the following is usually a benefit of using electronic funds transfer for international cash transactions?

a.

Reduction of the frequency of data entry errors.

b.

Creation of self-monitoring access controls.

c.

Off-site storage of source documents for cash transactions.

d.

Improvement of the audit trail for cash receipts and disbursements.

 

Choice "a" is correct. Use of electronic funds transfer for any funds transfer reduces the need for manual data entry, thus reducing the occurrence of data entry errors.

Choice "d" is incorrect. Use of electronic funds transfer is likely to result in a reduction of the paper audit trail surrounding cash receipts and disbursements.

Choice "b" is incorrect. Use of electronic funds transfer creates a need for more stringent access controls.

Choice "c" is incorrect. Use of electronic funds transfer does not affect company policy regarding storage of source documents (e.g., an accounts payable invoice) for cash transactions.

25

Many entities use the Internet as a network to transmit electronic data interchange (EDI) transactions. An advantage of using the Internet for electronic commerce rather than a traditional value-added network (VAN) is that the Internet:

a.

Possesses superior characteristics regarding disaster recovery.

b.

Converts EDI transactions to a standard format without translation software.

c.

Permits EDI transactions to be sent to trading partners as transactions occur.

d.

Automatically batches EDI transactions to multiple trading partners.

Choice "c" is correct. The Internet permits EDI transactions to be sent to trading partners as transactions occur, rather than batching them periodically (as with a VAN).

Choice "d" is incorrect. A VAN batches transactions to multiple trading partners, whereas transactions over the Internet are sent to each trading partner as they occur.

Choice "a" is incorrect. A VAN is superior to the Internet in terms of disaster recovery because the additional service provided by VANs often includes the archiving of data. Records of EDI transactions may be kept for months or years, which can aid in the disaster recovery process.

Choice "b" is incorrect. Regardless of the method of transport used, translation software is still needed in an EDI environment.

26

Which of the following statements regarding Electronic Data Interchange (EDI) is false?

a.

EDI requires all transactions to be submitted in a standard format.

b.

EDI can be conducted through the use of VANs or over the Internet.

c.

Data transmission costs for EDI are falling.

d.

EDI does not require the companies involved to have any prior relationship with each other.

Choice "d" is correct. The statement is false. EDI requires that companies have a prior relationship. Agreements will have been drawn up between the companies to outline how the systems will operate. The assertion that EDI does not require a previously established relationship is not true.

Choice "b" is incorrect. The question stem seeks the response that is false, and this statement is true. Although EDI is generally transmitted over VANs, it can be transmitted over the internet.

Choice "c" is incorrect. The question stem seeks the response that is false, and this statement is true. Advances in technology have produced decreasing transmission costs for EDI.

Choice "a" is incorrect. The question stem seeks the response that is false, and this statement is true. EDI requires standard formats for all transactions.

27

Which of the following best defines electronic data interchange (EDI) transactions?

a.

Entered sales data are electronically transmitted via a centralized network to a central processor.

b.

Customers' funds-related transactions are electronically transmitted and processed.

c.

Electronic business information is exchanged between two or more businesses.

d.

Products sold on central web servers can be accessed by users any time.

Choice "c" is correct. The best definition of EDI is electronic (computer-to-computer) exchange of business transaction documents (business information). EDI is always between two separate businesses (not internally).

Choice "b" is incorrect. It is difficult to determine exactly what the transmission of "customers' funds-related transactions" means. Does it mean credit card purchases? Does it mean the transfer of funds between the merchants and the banks to pay for those purchases? In either case, however, it is unlikely to be EDI; although, this choice is probably the second best answer.

Choice "a" is incorrect. Transmitting entered sales data to a central processor would be internal data communication. For internal data transfers, there is no reason to bother with all of the format translation that is necessary with EDI transactions.

Choice "d" is incorrect. Access to products and product information is not EDI. EDI is electronic (computer-to-computer) exchange of business transaction documents (business information) and is always between two separate businesses (not internally).

28

Which of the following is usually a benefit of transmitting transactions in an electronic data interchange (EDI) environment?

a.

An increased opportunity to apply statistical sampling techniques to account balances.

b.

A reduced need for an auditor to test computer controls related to sales and collections transactions.

c.

A compressed business cycle with lower year-end receivables balances.

d.

No need to rely on third-party service providers to ensure security.

Choice "c" is correct. Because EDI speeds transaction processing, the business cycle is generally shortened and year-end receivable balances are reduced.

Choice "b" is incorrect. An EDI environment requires greater testing of computer controls.

Choice "a" is incorrect. An EDI environment does not affect the ability to apply statistical sampling techniques to account balances.

Choice "d" is incorrect. EDI is often implemented through communication intermediaries, requiring reliance on those providers for provision of appropriate security measures.

29

Which of the following statements is correct concerning the security of messages in an electronic data interchange (EDI) system?

a.

Encryption performed by a physically secure hardware device is more secure than encryption performed by software.

b.

Security at the transaction phase in EDI systems is not necessary because problems at that level will be identified by the service provider.

c.

Message authentication in EDI systems performs the same function as segregation of duties in other information systems.

d.

Removable drives that can be locked up at night provide adequate security when the confidentiality of data is the primary risk.

Choice "a" is correct. Encryption performed by a physically secure hardware device is more secure than encryption performed by software. In this question, the hardware is stated to be physically secure. It is possible in a networked environment (implied because of EDI) for software to be compromised in some manner and thus for the encryption to be interfered with if it is accomplished by software.

Choice "d" is incorrect. Removable disk drives are not going to help in EDI system security.

Choice "c" is incorrect. Message authentication confirms that a message is from an authentic sender. It is not a part of segregation of duties nor does it substitute as a control in place of segregation of duties.

Choice "b" is incorrect. EDI service providers are responsible for network security but not for transaction security.

30

Which of the following is usually a benefit of using electronic funds transfer for international cash transactions?

a.

Improvement in the audit trail for cash transactions.

b.

Creation of multilingual disaster recovery plans.

c.

Reduction in the frequency of data entry errors.

d.

Off-site storage of foreign source documents.

Choice "c" is correct. EFT (electronic funds transfers), either international or domestic, will normally result in reduced data entry errors because the data transfers are system-to-system transfers with less data entry and thus fewer "human" errors.

Choice "b" is incorrect. The "creation of multilingual disaster recovery plans" is a pure distracter. Disaster recovery plans do not have to be multilingual and, even if they are, that does nothing to affect international cash transactions one way or the other.

Choice "d" is incorrect. Off-site storage of foreign source documents has nothing to do with electronic funds transfer for international cash transactions. If it is good to store foreign source documents off-site, it would also be good to store domestic source documents off-site. Either way, where source documents are stored has nothing to do with electronic funds transfer, either international or domestic.

Choice "a" is incorrect. There is not anything about electronic funds transfer, international or non-international, which will necessarily improve, or necessarily damage, the audit trail for cash transactions.

31