Question 1

Checkpoint auto leasing is a small company with six employees. The best action that it can take to increase its internal control effectiveness is Hire temporary employees to aid in the segregation of duties. Hire a bookkeeper to perform monthly "write up" work. Clearly delegate responsibilities to each employee for the functions that they are assigned. Engage the owner in direct participation in the activities, including financial record-keeping, of the business.

Accepted Answer

Engage the owner in direct participation in the activities, including financial record-keeping, of the business. This is the best answer since engaging the owner in the activities of the business is an important compensating control in small organizations.

Question 2

Which of the following statements is (are) true. I. A greater level of control is necessary in automated than manual systems. II. The uniformity of transaction processing is higher in automated than manual systems. Both I and II. I only. II only. Neither I or II.

Accepted Answer

II only. Statement II is correct. Automated transaction processing results in a greater uniformity of transactions.

Question 3

Morgan Property Management, Inc. recently switched from a manual accounting system to a computerized accounting system. The system supports online real-time processing in a networked environment, and six employees have been granted access to various parts of the system in order to perform their jobs. Relative to the manual system, Morgan can expect to see That functions that had previously been spread across multiple employees have been combined. An increase in the incidence of clerical errors. A decrease in the incidence of systemic errors. A decrease in the need for access controls to the accounting records.

Accepted Answer

That functions that had previously been spread across multiple employees have been combined. It is common for computerized systems to combine functions that would be considered incompatible in a manual system (for example, in computerized systems, a single employee is often responsible for creating the deposit and posting the transactions to the cash receipts journal, the accounts receivable sub ledger, and the general ledger). This can occur because the system limits the transactions that it is possible for the employee to record, creating a compensating control.

Question 4

Which of the following characteristics distinguishes computer processing from manual processing? Computer processing virtually eliminates the occurrence of computational error normally associated with manual processing. Errors or fraud in computer processing will be detected soon after their occurrences. The potential for systematic error is ordinarily greater in manual processing than in computerized processing. Most computer systems are designed so that transaction trails useful for audit purposes do not exist.

Accepted Answer

Computer processing virtually eliminates the occurrence of computational error normally associated with manual processing. The high degree of accuracy of computer computation virtually eliminates the occurrence of computational errors.

Question 5

Which of the following sets of duties would not be performed by a single individual in a company with the most effective segregation of duties in place? Posting accounts payable transactions and entering additions and terminations to payroll. Having custody of signed checks yet to be mailed and maintaining depreciation schedules. Approving sales returns on customers’ accounts and depositing customers’ checks in the bank. Preparing monthly customer statements and maintaining the accounts payable subsidiary ledger.

Accepted Answer

Approving sales returns on customers’ accounts and depositing customers’ checks in the bank. Correct. Both tasks occur in the revenue cycle. In addition, fraud risk exists if one individual both approves sales returns and deposits checks. A criminal individual could steal the customer checks and create falsified returns to balance the customer's account from which the check was stolen.

Question 6

Each of the following would help prevent incorrect postings to the general ledger in a computerized accounting system, except Validating the posting date of the transaction. Restricting the ability to post directly to accounts with subsidiary ledgers. Performing a range check on the general ledger account in the transaction. Establishing a unique transaction number for each general ledger posting.

Accepted Answer

Establishing a unique transaction number for each general ledger posting. Correct! Although there are cases in which transaction numbers might be useful (e.g., identifying duplicate transactions), many accounting systems do not include transaction numbers for general ledger postings.

Question 7

Which of the following statements is correct regarding information technology (IT) governance? A primary goal of IT governance is to balance risk versus return over IT and its processes. IT governance is an appropriate issue for organizations at the level of the board of directors only. IT goals should be independent of strategic goals. IT governance requires that the Control Objectives for Information and related Technology (COBIT) framework be adopted and implemented.

Accepted Answer

A primary goal of IT governance is to balance risk versus return over IT and its processes. Correct! The purpose of IT governance is to strategically manage and acquire IT resources in support of the organization's mission. This requires balancing the risks and returns from IT assets.

Question 8

The IT Steering Committee at Henry Flower's Flower Shop is determining whether the basic infrastructure of the company should include a significant component of cloud computing. In this exercise, the committee is primarily using the company's IT strategic plan to conceptually consider how cloud computing advances or detracts from the company's business objectives. In the COBIT model, this is best classified as an example of Planning and Organization Acquisition and Implementation Delivery and Support Monitoring

Accepted Answer

Planning and Organization Correct! This task is not a part of assessing how IT can best contribute to business objectives.

Question 9

One important purpose of COBIT is to Guide managers, users, and auditors to adopt best practices related to the management of information technology. Identify specific control plans that should be implemented to reduce the occurrences of fraud. Specify the components of an information system that should be installed in an e-commerce environment. Suggest the type of information that should be made available for management decision making.

Accepted Answer

Guide managers, users, and auditors to adopt best practices related to the management of information technology. This is one important purpose of COBIT.

Question 10

In COBIT, the process of reviewing system response time logs falls within the _______ control process domain. Acquire and implement. Deliver and support. Monitor and evaluate. Plan and organize.

Accepted Answer

Monitor and evaluate. The process of reviewing system response logs is within the "monitor the processes" (M1) activity, which falls within the "monitor and evaluate" domain. Therefore, this is the correct answer.

Question 11

Management of a financial services company is considering a strategic decision concerning the expansion of its existing local area network (LAN) to enhance the firm’s customer service function. Which of the following aspects of the expanded system is the least significant strategic issue for management? How the expanded system can contribute to the firm’s long-range business plan. How the expanded system would support daily business operations. How indicators can be developed to measure how well the expanded system achieves its business objectives. How the expanded system will contribute to the reduction of operating costs.

Accepted Answer

How the expanded system will contribute to the reduction of operating costs. This answer is correct. Cutting costs, per se, is the least important issue. Payoff, or return on costs, is a more relevant strategic consideration.

Question 12

Control Objectives for Information and Related Technology (COBIT) provides a framework for Internet-based systems. IT governance and management of enterprise IT. Auditing IT Systems. The implementation for new technology.

Accepted Answer

IT governance and management of enterprise IT. This answer is correct. COBIT provides a framework for IT governance and management of enterprise IT.

Question 13

An enterprise resource planning (ERP) system has which of the following advantages over multiple independent functional systems? Modifications can be made to each module without affecting other modules. Increased responsiveness and flexibility while aiding in the decision-making process. Increased amount of data redundancy, since more than one module contains the same information. Reduction in costs of implementation and training.

Accepted Answer

Increased responsiveness and flexibility while aiding in the decision-making process. Improving responsiveness and flexibility, and aiding the decision-making processes in an organization, are important goals of an ERP system. Hence, this is the best answer.

Question 14

What is an example of the use of the cloud to create software and programs? IaaS PaaS SaaS SAP

Accepted Answer

PaaS PaaS is the use of the cloud to create (not access) software.

Question 15

What is an example of the use of the cloud to access software and programs? IaaS PaaS SaaS SAP

Accepted Answer

SaaS SaaS is the use of the cloud to access software.

Question 16

Which of the following is true of enterprise resource planning (ERP) systems? I. The online analytical processing system (OLAP) provides data warehouse capabilities for the ERP system. II. The ability of an ERP system to provide an integrated view of transactions in all parts of the system is a function of the online transaction processing (OLTP) system. I only. II only. Both I and II. Neither I nor II.

Accepted Answer

I only. The online analytical processing system (OLAP) incorporates data warehouse and data mining capabilities within the ERP. The online transaction processing system (OLTP) records the day-to-day operational transactions and enhances the visibility of these transactions throughout the system. It is primarily the OLAP and not the OLTP, that provides an integrated view of transactions in all parts of the system. The OLTP is primary concerned with collecting data (and not analyzing it) across the organization.

Question 17

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.

Accepted Answer

An enterprise resource planning system. ERPs provide transaction processing, management support, and decision-making support in a single, integrated package. By integrating all data and processes of an organization into a unified system, ERPs attempt to eliminate many of the problems faced by organizations when they attempt to consolidate information from operations in multiple departments, regions, or divisions. This is the correct answer since facilitating information exchange and collaboration is the primary purpose of the proposed system.

Question 18

An internal audit manager requested information detailing the amount and type of training that the IT department's staff received during the last year. According to COSO, the training records would provide documentation for which of the following principles? Exercising oversight of the development and performance of internal control Demonstrating a commitment to retain competent individuals in alignment with objectives Developing general control activities over technology to support the achievement of objectives Holding individuals responsible for their internal control responsibilities in the pursuit of objectives

Accepted Answer

Demonstrating a commitment to retain competent individuals in alignment with objectives Correct! Evaluating the quality and nature of IT department staff training is essential to retaining competent individuals in the organization.

Question 19

Roberta is a programmer who writes applications for Parsnips Health Care. She also has access to the file library. This is a concern because she may: Grant system access inappropriately to others. Make changes in applications. Make changes to both the live and archive copies of programs. Fail to follow system change protocols.

Accepted Answer

Make changes to both the live and archive copies of programs. (Correct!) If she changes both live and archive copies of programs, changes that she has made may not be detected.

Question 20

The position responsible for managing the flow of documents and reports in and out of the computer operations department is the Data entry clerk. Computer operator. Data control clerk. File librarian.

Accepted Answer

Data control clerk. The data control clerk controls the flow of all documents into and out of computer operations.

Question 21

To maintain effective segregation of duties within the information technology function, an application programmer should have which of the following responsibilities? Modify and adapt operating system software. Correct detected data entry errors for the cash disbursement system. Code approved changes to a payroll program. Maintain custody of the billing program code and its documentation.

Accepted Answer

Code approved changes to a payroll program. This is an appropriate responsibility for an application programmer.

Question 22

In a large multinational organization, which of the following job responsibilities should be assigned to the network administrator? Managing remote access. Developing application programs. Reviewing security policy. Installing operating system upgrades.

Accepted Answer

Managing remote access. Managing remote access is an appropriate responsibility for a network administrator.

Question 23

When a client's accounts payable computer system was relocated, the administrator provided support through a dial-up connection to a server. Subsequently, the administrator left the company. No changes were made to the accounts payable system at that time. Which of the following situations represents the greatest security risk? User passwords are not required to be in alphanumeric format. Management procedures for user accounts are not documented. User accounts are not removed upon termination of employees. Security logs are not periodically reviewed for violations.

Accepted Answer

User accounts are not removed upon termination of employees. Failing to remove user accounts upon termination of employees is an important control risk, and it is directly relevant to the case facts.

Question 24

Which of the following information technology (IT) departmental responsibilities should be delegated to separate individuals? Network maintenance and wireless access. Data entry and antivirus management. Data entry and application programming. Data entry and quality assurance.

Accepted Answer

Data entry and application programming. The separation of the data entry function from the application programming function is critical to the segregation of duties within an IT department. This is because if one both enters data and changes the programs into which those data are entered, one can perpetrate consequential financial frauds. This is why data entry occurs within the operations unit of an IT department and application development occurs within the development function of an IT department. These functions must be kept separate and their duties segregated. Therefore, this is the best answer to the question

Question 25

Governance is primarily the responsibility of: Top management. The board. The CEO. Those individuals who are identified by SOX Section 404 as responsible for the system of internal control.

Accepted Answer

The board. Correct! This statement is true. Governance is primarily the responsibility of the board of directors.

Question 26

Selling a digitized product can: Decrease its cost. Improve its quality. Both A and B. Neither A nor B.

Accepted Answer

Both A and B. This statement is true. Therefore, this is the correct answer since selling a digitized product can reduce costs and improve quality (e.g., some online books are cheaper, include hyperlinks to resources and key terms, and include additional content).

Question 27

A company that sells hand-carved statues from rural Indonesia online is using a ___________ strategy: Digitization Product differentiation Cost leadership Integrated

Accepted Answer

Product differentiation Correct! This is an example of a product differentiation strategy since competitors are unlikely to be able to sell this same product.

Question 28

Which of the following factors has the greatest impact on the design of an effective management reporting system? Number of transactions to be processed Types of decisions to be made Number of authorized users Number of regulatory agencies to be satisfied

Accepted Answer

Types of decisions to be made Correct! Management reporting systems exist to aid decisions and reporting. Hence, the types of decisions that are supported by the system is the most important design element in creating a management reporting system.

Question 29

Peetie's Pet Care has a system that examines large data sets to determine patterns in clients' use of its facilities. This is most likely an example of: Operational systems. Management information systems (MISs). Data-driven DSSs. Model-driven DSS.

Accepted Answer

Data-driven DSSs. (Correct!) This is a data-drive DSS that is engaging in data mining.

Question 30

Which of the following types of systems would you use to record the number of hours worked during the current pay period for each of your employees? An office automation system (OAS). A decision support system (DSS). A transaction processing system (TPS). A partitioned system (PS).

Accepted Answer

A transaction processing system (TPS). Transaction processing systems (TPSs) support the day-to-day activities of the business (purchasing of goods and services, manufacturing activities, sales to customers, cash collections, payroll, etc.).

Question 31

Which of the following is an example of a non-financial transaction? Sending a purchase order to a vendor to purchase items for re-sale. Creating a cash receipt to mark receipt of a customer payment. Preparing a payroll check to send to an employee in payment of the current month's wages. Approving a vendor invoice for payment.

Accepted Answer

Sending a purchase order to a vendor to purchase items for re-sale. Sending a purchase order to a vendor to purchase items for re-sale is an example of a non-financial transaction, as it does not require a debit/credit entry in the accounting system (there is no completed transaction, just a request for a transaction).

Question 32

The Board of Directors of Martin Manufacturing Enterprises, Inc. is meeting to consider whether they should expand their manufacturing facilities to include a product line. Although the company's current financial position and sales potential for existing products are part of the information the Board must consider, of even greater importance is external information concerning economic conditions, market projects for the new product, the cost of long-term financing alternatives, and information about potential competitors. The Board of Directors' decision process would be best supported by a Management information system (MIS). Knowledge management system (KMS). Decision support system (DSS). Executive support system (ESS).

Accepted Answer

Executive support system (ESS). Executive support systems (ESSs) are a subset of DSS that are especially designed for forecasting and making long-range, strategic decisions, and they place greater emphasis on external data. The need to consider a large proportion of external information in the decision process makes an executive support system (ESS) the best choice listed.

Question 33

This system is most likely to include external data. Operational system. MIS. DSS. ESS.

Accepted Answer

ESS. ESS are most likely to include external data.

Question 34

The system that most resembles a managerial accounting, budgeting system is: Operational system. MIS. DSS. ESS.

Accepted Answer

MIS MIS take planning information (budgets, forecasts, etc.) data and compare it to actual results in periodic management reports (summary reports, variance reports, and exception reports). Hence, MIS can be considered similar to, and may incorporate, traditional budgeting systems.

Question 35

Which of the following is true in regard to data warehouses? I. The bulk of the data found in a data warehouse comprises historical operational data. II. Pattern recognition is one of the principal functionalities offered by data mining software. I only. II only. Both I and II. Neither I nor II.

Accepted Answer

Both I and II. A data warehouse is a database archive of an organization's operational transactions (sales, purchases, production, payroll, etc.) over a period of years; external data that might be correlated with these transactions, such as economic indicators, stock prices, and exchange rates, are also included. Pattern recognition is a major component of data mining software: data mining is the process of performing statistical analysis and automatically searching for patterns in large volumes of data.

Question 36

Which of the following is a critical success factor in data mining a large data store? Pattern recognition. Effective search engines. Image processing systems. Accurate universal resource locater (URL).

Accepted Answer

Pattern recognition. Data mining is the process of sorting through data maintained in a data warehouse in an effort to identify relationships between data fields or events. These relationships are often classified as sequences (one event leads to another) or associations (one event is correlated with another event). The ability to recognize these patterns is, thus, critical to successful data mining.

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Module 11- IT Governance and Roles in Business Flashcards

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