Review of Basic IT Concepts; Introduction to ACIS

1. ________ is a series of instructions that tells the computer hardware what to do and
how to do it.

Answer: software

2. Utility software is system software designed to help analyze, configure, optimize or

maintain a computer.

Answer: True

3. The heart (and brains) of the computer is the

Answer: CPU

4. An optical mark reader is

Answer: an input device

5. Which of the following statements most likely represents a disadvantage for an entity
that keeps microcomputer-prepared data files rather than manually prepared files?

Answer: It is usually easier for unauthorized persons to access and alter the files.

6. Attestation services encompasses external audit of financial statements and internal

audit of procedures, internal controls and policies.

Answer: False

7. Evidence in audit shall be

Answer: Only a (appropriate) and b (sufficient)

8. Who is primarily responsible for the fairness of presentation of financial statements?

Answer: The management

9. Software is available to help you with all kinds of tasks related to computing.

Answer: True

10. Utility software is generally used by people with an advanced level of computer
knowledge.

Answer: True

11. RAM stands for

Answer: Random Access Memory

12. Uses computers for word processing, browsing, gaming and casual activities
involving the computer.

Answer: end user

13. All of the following assertions of management in external audit, except

Answer: faithful representation

14. Adequate disclosure in the notes to financial statements support the assertion of

Answer: Completeness

15. A client engages an audit firm to issue an opinion as to the compliance of a

company to the existing labor laws. This service can be classified as

Answer: Assurance, non-financial

16. There are various versions of Windows software. What type of software is Windows?

Answer: operating software

17. Microsoft Word is an example of utility software.

Answer: False

18. When you save a file, it is permanently saved on the

Answer: Hard Drive

19. Select three input devices your computer uses:

Answer: Mouse, keyboard, scanner

20. An integrated group of programs that supervises and support the operations of a
computer system as it executes users application program is called a(n)

Answer: operating system

21. A modem is a device that

Answer: allows computer signals to be sent over a telephone line

22. The credibility of financial information prepared by the management is enhanced

by the external auditor’s

Answer: report containing his unqualified opinion

23. Which of the following is technically not an external auditor’s opinion?

Answer: Disclaimer of an opinion

24. “The auditor did not find any material item that did not comply with the given
standards/basis for comparison.” The auditor most likely performed a (an)

Answer: review of financial statements

25. The operating system is a set programs that coordinate all the activities among all
hardware devices.
Answer: True

26. Application software consist of programs that perform specific tasks for users.
Examples include Microsoft Word, Internet Explorer, and Microtype 5.

Answer: True

27. A common printer is

Answer: an output device

28. Computer systems are becoming more vulnerable to unauthorized access because

Answer: access can be gained electronically without physical entry to the facilities

29. An operating system is

Answer: the programs that manage the processing operations of the computer

30. Management advisory services encompasses non assurance services

Answer: False

Rev + Exp Cycle (Invty) T or F

1. The use of inventory reorder points suggests the need to obtain specific authorization.

Answer: False

2. A major risk exposure in the expenditure cycle is that accounts payable may be
overstated at the end of the accounting year.

Answer: False

3. Inventory control should be located in the warehouse.

Answer: False

4. Proper segregation of duties requires that the responsibility approving a payment be

separated from posting to the cash disbursements journal.

Answer: True

5. Firms that wish to improve control over cash disbursements use a voucher system.

Answer: True

6. If accounts payable receives an invoice directly from the supplier it needs to be

reconciled with the purchase order and receiving report.

Answer: True
7. An automated cash disbursements system can yield better cash management since
payments are made on time.

Answer: True

8. In a voucher system, the sum of all unpaid vouchers in the voucher register equals the
firm’s total voucher payable balance.

Answer: True

9. One reason for authorizing purchases is to enable efficient inventory management.

Answer: True

10. A purchasing system that employs electronic data interchange does not use a
purchase order.

Answer: False

11. Permitting warehouse staff to maintain the only inventory records violates separation
of duties.

Answer: True

12. Supervision in receiving is intended to reduce the theft of assets.

Answer: True

13. The blind copy of the purchase order that goes to the receiving department
contains no item descriptions.

Answer: False

14. Authorization for a cash disbursement occurs in the cash disbursement department
upon receipt of the supplier’s invoice.

Answer: False

15. Inspection of shipments in the receiving department would be improved if the

documentation showed the value of the inventory.

Answer: False

Rev + Exp Cycle (Inty) MCQ

1. A complete revenue and collection cycle walk-through involves:

Answer: C. Following a sale from the initial customer order through credit approval,
billing, and delivery of goods, to the entry in the sales journal and subsidiary accounts
receivables records, and finally to its subsequent collection and cash deposit.
2. The billing function normally should report to which of the following?

Answer: A. Controller

3. Which of the following steps in the sales business process is optional

Answer: Contract creation

4. Pricing usually occurs during which step in the sales business process?

Answer: B. Order entry

5. Which of the following documents is used to post sales on account to customers in

the accounts receivables ledger?

Answer: B. Invoices

6. The remittance list prepared in the mailroom to document receipts should be

forwarded directly to ________.

Answer: C. Accounts receivable

7. Which of the following is an effective internal accounting control over accounts

receivable?

Answer: D. The billing function should be assigned to people other than those
responsible for maintaining accounts receivable subsidiary records.

8. Which of the following will prevent the lapping of trade accounts receivable?

Answer: C. Have customers send payments directly to the company’s depository bank

9. Which of the following control procedures may prevent the failure to bill customers
for some shipments?

Answer: A. Each shipment should be supported by a prenumbered sales invoice that is

accounted for.

10. Which of the following controls would help ensure that all credit sales of an entity
are recorded?

Answer: D. The billing department supervisor matches prenumbered shipping

documents with entries in the sales journals.

11. The invoice is completed when ________.

Answer: B. The goods have been shipped.

12. Which of the following departments normally should be responsible for the
preparation and journalizing of credit memos on the receipt of approved sales return
memos to authorize a reduction in customer account balances of returned goods?

Answer: D. Billing
13. The remittances received in the mailroom should be forwarded directly to ________.

Answer: A. Cash receipts

14. As payments are received, one mailroom employee is assigned the responsibility of
prelisting receipts and preparing the deposit slip prior to forwarding the receipts, and
remittance advices to accounts receivable for posting. A/R personnel refoot the
deposit slip, stamp a restrictive endorsement on the back of each check, and then
forward the receipts and deposit slip to the treasury department. Which of the following
is a reasonable assessment of internal control in this process?

Answer: D. Inadequate internal control because of a lack of segregation of duties.

15. Typical source documents involved in the Revenue and Collection cycle does not
include:
Answer: D. Vendor Invoice

Fixed Asset, Payroll, Conversion (T or F)

1. To improve internal control, paychecks should be distributed by the employee’s

supervisor.

Answer: False

2. Payroll processing can be automated easily because accounting for payroll is very
simple.

Answer: False

3. Timekeeping is part of the personnel function.

Answer: False

4. Asset maintenance involves only the recording of depreciation charges. Physical

improvements are always expensed.

Answer: False

5. The payroll master is a person who is expert on payroll transactions.

Answer: False

6. CIM stands for Computer-integrated Machines.

Answer: False

7. According to the principles of CIM, wastes cause overburden and unevenness in the
distribution of workloads to employees.

Answer: False

8. The personnel department authorizes changes in employee pay rates.

Answer: True

9. The function of the cost accounting department in the conversion cycle is properly
costing the units produced.

Answer: True

10. Authorization to dispose of fixed assets should be issued by the user of the asset.

Answer: False

11. Work-in-process records are updated by payroll personnel.

Answer: False

12. The fixed asset disposal report authorizes the user department to dispose of a fixed
asset.

Answer: False

13. Lean manufacturing would like to minimize inventory levels to avoid inventory costs.

Answer: False

14. The cost accounting department designs the product to be produced by the
production department.

Answer: False

15. Proper segregation of duties requires that the responsibility approving a payment be
separated from posting to the cash disbursements journal.

Answer: True

16. The depreciation schedule shows when assets are fully depreciated.

Answer: True

17. Fixed Asset Systems must keep track of the physical location of each asset to
promote accountability.

Answer: True

18. Tools like Gantt chart and PERT are useful in production planning.

Answer: True

19. Time cards are used by cost accounting to allocate direct labor charges to work in
process.

Answer: False

20. Most payroll systems for mid-size firms use real-time data processing.

Answer: False
21. The conversion cycle starts with the acquisition of raw materials and ends with
delivery of the finished goods to the customers.

Answer: False

22. Batch processing creates a homogeneous product through a continuous series of

standard procedures.

Answer: False

23. Employee paychecks should be drawn against a special checking account.

Answer: True

24. The philosophy of customer satisfaction permeates the world-class firm.

Answer: True

25. Authorization for a cash disbursement occurs in the cash disbursement department
upon receipt of the supplier’s invoice.

Answer: False

26. Because a time clock is used, no supervision is required when employees enter and
leave the work place.

Answer: False

27. The supervisor is the best person to determine the existence of a “phantom or ghost
employee” and should distribute paychecks.

Answer: False

28. Time cards capture the total time an individual worker spends on each production
job.

Answer: False

29. Ideally, payroll checks are written on a special bank account used only for payroll.

Answer: True

30. Fixed asset accounting systems include cost allocation and matching procedures
that are not part of routine expenditure systems.

Answer: True