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14.What are the five conditions necessary for an act to be considered fraudulent? 15.What is the objective of SAS 99? 16.Distinguish between exposure and risk. 17.Explain the characteristics of management fraud. 18.The text discusses many questions about personal traits of employees which might help uncover fraudulent activity. What are three? 19.Give two examples of employee.
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TRUE/FALSE 1.The ethical principle of justice asserts that the benefits of the decision should be distributed fairly to those who share the risks. 2.The ethical principle of informed consent suggests that the decision should be implemented so as to minimize all of the risks and to avoid any unnecessary risks. 3.Employees should be.
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Use the internal control procedures listed below to complete the statements. segregation of dutiesspecific authorization general authorization accounting records access controlsindependent verification supervision 7.A clerk reorders 250 items when the inventory falls below 25 items. This is an example of __________________________. 8.The internal audit department recalculates payroll for several employees each pay period. This is an.
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11.Program flowcharts are used to describe the logic represented in system flowcharts. 12.Batch processing systems can store data on direct access storage devices. 13.Backups are automatically produced in a direct access file environment. 14.The box symbol represents a temporary file. 15.Auditors may prepare program flowcharts to verify the correctness of program logic. 16.A control account.
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11.Customers should be billed for backorders when a.the customer purchase order is received b.the backordered goods are shipped c.the original goods are shipped d.customers are not billed for backorders because a backorder is a lost sale 12.Usually specific authorization is required for all of the following except a.sales on account which exceed the credit limit b.sales of.
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ESSAY 1.Contrast the responsibilities of operations management, middle management, and top management. Explain the different information needs for each level of management. 2.Explain the difference between data and information. 3.Why do accountants need to understand the organizational structure of the business? 4.Several disadvantages of distributed data processing have been discussed. Discuss at least three. .
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SHORT ANSWER 1.What are the main issues to be addressed in a business code of ethics required by the SEC? 2.List the four broad objectives of the internal control system. 3.Explain the purpose of the PCAOB 4.What are the five internal control components described in the SAS 78 / COSO framework 5.What are management responsibilities.
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TRUE/FALSE 1.Processing more transactions at a lower unit cost makes batch processing more efficient than real-time systems. 2.The process of acquiring raw materials is part of the conversion cycle. 3.Directing work-in-process through its various stages of manufacturing is part of the conversion cycle. 4.The top portion of the monthly bill from a credit card.
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SHORT ANSWER 1.Distinguish between a packing slip, shipping notice, and a bill of lading. 2.State two specific functions or jobs that should be segregated in the sales processing system. 3.State two specific functions or jobs that should be segregated in the cash receipts system. 4.List two points in the sales processing system when authorization.
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9.Computer fraud is easiest at the data collection stage. Why? 10.Explain why collusion between employees and management in the commission of a fraud is difficult to both prevent and detect. 11.Since all fraud involves some form of financial misstatement, how is Fraudulent Statement fraud different? 12.Explain the problems associated with lack of auditor.
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21.The type of transaction most suitable for real-time processing is a.recording fixed asset purchases b.recording interest earned on long-term bonds c.adjusting prepaid insurance d.recording a sale on account 22.Which step is not found in batch processing using sequential files? a.control totals b.sort runs c.edit runs d.immediate feedback of data entry errors 23.Both the revenue and the expenditure cycle can be.
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21.Internal controls for handling sales returns and allowances do not include a.computing bad debt expense using the percentage of credit sales b.verifying that the goods have been returned c.authorizing the credit memo by management d.using the original sales invoice to prepare the sales returns slip 22.The printer ran out of preprinted sales invoice forms and.
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21.Which of the following indicates a strong internal control environment? a.the internal audit group reports to the audit committee of the board of directors b.there is no segregation of duties between organization functions c.there are questions about the integrity of management d.adverse business conditions exist in the industry 22.According to SAS 78, an effective accounting.
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31.The data processing method that can shorten the cash cycle is a.batch, sequential file processing b.batch, direct access file processing c.real-time file processing d.none of the above 32.Which of the following is not a risk exposure in a microcomputer accounting system? a.reliance on paper documentation is increased b.functions that are segregated in a manual environment may be.
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18.What information is provided by a record layout diagram? 19.Comment on the following statement: “Legacy systems use flat file structures.” 20.What factor influences the decision to employ real-time data collection with batch updating rather that purely real-time processing? Explain. 21.How is backup of database files accomplished? .
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31.Which symbol represents a decision? a. b. c. d. 32.The characteristics that distinguish between batch and real-time systems include all of the following except a.time frame b.resources used c.file format d.efficiency of processing 33.A file that stores data used as a standard when processing transactions is a.a reference file b.a master file c.a transaction file d.an archive file 34.Sequential storage means a.data.
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MULTIPLE CHOICE 1.The revenue cycle consists of a.one subsystem–order entry b.two subsystems–sales order processing and cash receipts c.two subsystems–order entry and inventory control d.three subsystems–sales order processing, credit authorization, and cash receipts 2.The reconciliation that occurs in the shipping department is intended to ensure that a.credit has been approved b.the customer is billed for the exact quantity shipped c.the.
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5.Name and explain the purpose of the three major subsystems of the AIS: 6.What are the three primary functions performed by the transaction processing system? 7.The most commonly stated benefits of DDP are cost savings, increased user satisfaction, and improved operational efficiency. Explain. 8.Data redundancy is described as a problem in flat-file systems.
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11.A written customer purchase order is required to trigger the sales order system. 12.Inventory control has physical custody of inventory. 13.The principal source document in the sales order system is the sales order. 14.Sales orders should be prenumbered documents. 15.Integrated accounting systems automatically transfer data between modules. 16.If a customer submits a written purchase order,.
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4.Time lag is one characteristic used to distinguish between batch and real-time systems. Explain. Give an example of when each is a realistic choice. 5.There are two subsystems to the revenue cycle. What are they and what occurs within each? 6.Resource use is one characteristic used to distinguish between batch and real-time.
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14.Which flowchart depicts the relationship between processes and the documents that flow between them and trigger activities? 15.What are the three characteristics that are used to distinguish between batch and real-time systems. 16.Give one advantages of real-time data collection. 17.In one sentence, what does updating a master file record involve? 18.What is destructive update? .
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31.An appraisal function housed within the organization that performs a wide range of services for management is a.internal auditing b.data control group c.external auditing d.database administration 32.Advantages of a database system include all of the following except a.elimination of data redundancy b.open access to all data by all users c.single update for changes in data d.confidence that all data.
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17.Why is an Independent Audit Committee important to a company? 18.What are the key points of the “Issuer and Management Disclosure” of the Sarbanes-Oxley Act? 19.In this age of high technology and computer based information systems, why are accountants concerned about physical (human) controls? 20.How has the Sarbanes-Oxley Act had a significant impact.
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31.The importance to the accounting profession of the Foreign Corrupt Practices Act of 1977 is that a.bribery will be eliminated b.management will not override the company’s internal controls c.firms are required to have an effective internal control system d.firms will not be exposed to lawsuits 32.The board of directors consists entirely of personal friends of.
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9.Provide a specific example of a general ledger account and a corresponding subsidiary ledger. 10.Name five documentation techniques? 11.Why is the audit trail important? 12.List a method of data processing that uses the destructive update approach? 13.Only four symbols are used in data flow diagrams. What are they? .
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16.What specific internal control procedure would prevent an increase in sales returns since salesmen were placed on commission? 17.What specific internal control procedure would detect the misplacement of a sales invoice after preparation and not mailed to the customer? The invoice was never found. 18.What function does the receiving department serve in.
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9.Explain the elements of the REA model and give an example of each. 10.Distinguish between the accounting information system and the management information system. 11.Why have re-engineering efforts been made to integrate AIS and MIS? 12.Why is it important to organizationally separate the accounting function from other functions of the organization? 13.The REA model.
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MULTIPLE CHOICE 1.Which system is not part of the expenditure cycle? a.cash disbursements b.payroll c.production planning/control d.purchases/accounts payable 2.Which system produces information used for inventory valuation, budgeting, cost control, performance reporting, and make-buy decisions? a.sales order processing b.purchases/accounts payable c.cash disbursements d.cost accounting 3.Which of the following is a turn-around document? a.remittance advice b.sales order c.purchase order d.payroll check 4.The order of the entries made in.
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11.The external auditor is responsible for establishing and maintaining the internal control system. 12.Segregation of duties is an example of an internal control procedure. 13.Controls in a computer-based information system are identical to controls in a manual system. 14.Preventive controls are passive techniques designed to reduce fraud. 15.Ethical issues and legal issues are essentially.
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SHORT ANSWER 1.List two of the three transaction cycles. 2.Documents that are created at the beginning of the transaction are called __________________________. 3.______________________________________ are the two data processing approaches used in modern systems. 4.Give a specific example of a turn-around document. 5.Explain when it is appropriate to use special journals. 6.What are the subsystems of the.
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6.What task can the accounts receivable department engage in to verify that all checks sent by the customers have been appropriately deposited and recorded? 7.What specific internal control procedure would prevent the sale of goods on account to a fictitious customer? 8.The clerk who opens the mail routinely steals remittances. Describe a specific.
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SHORT ANSWER 1.Entities outside the organization with a direct or indirect interest in the firm, such as stockholders, financial institutions, and government agencies, are called ____________________. 2.The process of breaking a system into smaller subsystem parts is called ______________________________. 3.Transactions with trading partners include ____________________ and ____________________. 4.A system is a group of two.
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16.Sarbanes-Oxley legislation requires that management designs and implements controls over the entire financial reporting process. What systems does this include? 17.Why is it necessary to distinguish between AIS and MIS? 18.How has SOX legislation impacted the consulting practices of public accounting firms? 19.What is discretionary reporting? 20.Name the five characteristics of information? .
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14.If an organization processes large numbers of transactions that use common data records, what type of system would work best (all else being equal)? 15.Why might an auditor use a program flowchart? 16.How are computer system flowcharts and program flowcharts related? 17.What are the key distinguishing features of legacy systems? .
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13.Explain the problems associated with lack of director independence 14.Explain the problems associated with Questionable Executive Compensation Schemes 15.Explain the problems associated with inappropriate accounting practices. 16.Explain the purpose of the PCAOB. .
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5.According to common law, there are five conditions that must be present for an act to be deemed fraudulent. Name and explain each. 6.Management fraud is regarded as more serious than employee fraud. Three special characteristics have been discussed for management fraud. What are they? Explain. 7.Four principal types of corruption are.
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21.What is the objective of re-engineering? 22.What are the key segregation of duties related to computer programs that process accounting transactions. 23.How is EDI more than technology? What unique control problems may it pose? 24.What makes point-of-sales systems different from revenue cycles of manufacturing firms? 25.Give three examples of Access Control in a Point-of-Sale.
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ESSAY 1.Describe the key activities in the revenue, conversion, and expenditure cycles. 2.Categorize each of the following activities into the expenditure, conversion or revenue cycles and identify the applicable subsystem. a.Preparing the weekly payroll for manufacturing personnel. b.Releasing raw materials for use in the manufacturing cycle. c.Recording the receipt of payment for goods sold. d.Recording the.
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11.Which of the following is an archive file? a.an accounts payable subsidiary ledger b.a cash receipts file c.a sales journal d.a file of accounts receivable that have been written off 12.Which document is not a type of source document? a.a sales order b.an employee time card c.a paycheck d.a sales return receipt 13.The most important purpose of a turn-around document.
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10.What is an entity? 11.Is a DFD an effective documentation technique for identifying who or what performs a particular task? Explain. 12.Is a flowchart an effective documentation technique for identifying who or what performs a particular task? Explain. 13.How may batch processing be used to improve operational efficiency? .
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APPENDIX QUESTION 22.Contrast procedures for preparing backups in a sequential file environment and direct access file environment. 23.Explain how a hashing structure works and why it is quicker than using an index. Give an example. If it so much faster, why isn't it used exclusively? 24.Explain the following three types of pointers: physical.
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MULTIPLE CHOICE 1.Which ethical principle states that the benefit from a decision must outweigh the risks, and that there is no alternative decision that provides the same or greater benefit with less risk? a.minimize risk b.justice c.informed consent d.proportionality 2.Individuals who acquire some level of skill and knowledge in the field of computer ethics are involved.
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ESSAY 1.The text describes six internal control activities. List four of them and provide a specific example of each one. 2.Contrast management fraud with employee fraud. 3.Discuss the importance of the Foreign Corrupt Practices Act of 1977 to the accounting profession. 4.Why are the computer ethics issues of privacy, security, and property ownership of.
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11.The concept of reasonable assurance suggests that a.the cost of an internal control should be less than the benefit it provides b.a well-designed system of internal controls will detect all fraudulent activity c.the objectives achieved by an internal control system vary depending on the data processing method d.the effectiveness of internal controls is a.
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TRUE/FALSE 1.The packing slip is also known as the shipping notice. 2.The bill of lading is a legal contract between the buyer and the seller. 3.Another name for the stock release form is the picking ticket. 4.Warehouse stock records are the formal accounting records for inventory. 5.The purpose of the invoice is to bill the.
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11.A clerk embezzles customer payments on account and covers up the theft by making an adjustment to the accounts receivable ledger. Describe a specific internal control procedure that would prevent this fraud. 12.A credit sale is made to a customer, even though the customer’s account is four months overdue. Describe a.
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