Test Bank

Accounting Information Systems, 13 Simkin/Rose/Normant)

Chapter 14 Computer Controls for Organizations Accounting Information System

1. All controls available for the computerized accounting information system of a company
should be implemented regardless of cost due to the high rate of computer crime. F
False
2. One of the "fallback" procedures of a computing center is the "grandfather parent-child"
file arrangement. T True
3. According to the text, data transcription would only be necessary for a computerized
accounting information system. True
4. Edit checks are very rarely used because they are not cost-effective controls. F False
5. Information processing personnel usually only use selective edit checks in data
processing applications due to the cost of computer time necessary for editing. F False
6. Testing processing programs with test data is performed only when a system is first
installed due to the high costs of such test runs. F False
7. The audit trail is easier to follow in an online computerized system as compared to a
batch system. F False
8. No record of transactions is made in an online computerized system. F False
9. Most computer vandalism is performed by "professional" computer criminals who have
no personal contact with the computer centers they disrupt. F False
10. The primary function of controls for a computerized accounting information system is to
detect computer fraud. F False
11. Input controls attempt to assure the validity, accuracy and completeness of the data
entered into an AIS. T True
12. It is more difficult to safeguard logical computer access than it is to safeguard physical
computer access. T True
13. Output controls for the computerized accounting information system focus primarily on
the security and distribution of print media prepared by the computer center. T True
14. Biometric identifications are irrelevant to computer network systems. F False
15. Consensus-based protocols contain an odd number of processors. T True
16. One of the techniques for controlling batch processing is the use of hash totals. T True
17. A hash total is obtained by counting all documents or records to be processed. F False
18. The control of input and output of accounting transactions to and from the information
processing subsystem should be performed by an independent control group. T True
 19. In most companies, contingency planning is unnecessary. F False
20. Contingency planning includes the development of a formal disaster recovery plan. T
True
21. Both external and internal file labels are useful in avoiding the use of the wrong input
tape. T True
22. An internal label may be used only with magnetic tape systems. F False
23. When they are not in use, tape and disk files should be stored apart from the computer
room under the control of a librarian. T True
24. A limit check in a computer program is comparable to a decision that an individual
makes in a manual system to judge a transaction's reasonableness. T True
25. A completeness test is an internal equipment control to test whether or not all transactions
have been processed. F False
26. Because of the integrative nature of database systems, cost-effective controls on these
systems are unimportant. F False
‘
 27. The principal function of an accounting system's computerized controls is:
a) Detecting computer frauds
b) Preventing computer frauds
c) Encouraging programmer honesty
d) none of the above

28. When a company is setting up its accounting information system, it is important for
mgmt to select:
a) a standard set of computer control mechanisms
b) Only those controls which appear to serve its needs
c) Controls whose benefits exceed their costs
d) b and c only

29. Which of the following control mechanisms is common to both observation and
recording control:
a) Confirmation Slips
b) Dual Observation
c) Preprinted forms
d) Turn around document

30. A very effective ID approach for safeguarding logical computer access bases user
recognition on:
a) IDA
b) Biometric identifications
c) Message acknowledgment procedures
d) Routing verification procedures

31. Which of the following is not a major reason for controls in a computerized
accounting information system?
a) More data are processed
b) Often, computerized data are unreadable to the human eye
c) With computerized data, there is a higher possibility of computer crime
d) all of the above are reasons for controls

32. Which of the follow is NOT a subcategory of input controls?

a) Observation, recording and transcription of data
b) Edit tests
c) Additional input controls
d) Data processing

33. General controls within IT environments that affect personnel include:

a) Use of computer accounts
b) Separation of duties
c) Identifying suspicious behavior of employees
d) all of the above affect personnel
 34. Logical access to the computer system would be best controlled by:
a) Intrusion alarm systems
b) Complex operation systems
c) Restrictions on physical access to online terminals
d) Password codes

35. Which of the following is NOT a feedback mechanism for observation controls for
data collection?
a) confirmation slips
b) Turnaround documents
c) Dual observation
d) Direct, 2-way communication devices

36. Which of the following is true about control totals?

a) Usually expressed in dollars
b) Batches normally occur in groups of 200 or more
c) Should "make sense" to be useful
d) none of the above

37. Which of the following is NOT a processing control?

a) Record counts
b) Control totals
c) Hash totals
d) Check digits

38. Edit checks performed "in tandem" would be defined as:

a) Tests of alphanumeric field content
b) Tests for valid codes
c) Redundant data checks
d) Tests of reasonableness

39. A data field could pass all editing tests and still be invalid. Additional controls to
cope with this would include:
a) Check digit
b) Unfound record test
c) Valid code test
d) a and b

40. Check digit control procedure have which of the following attributes?
a) Guarantees data validity
b) Detects fraudulent data
c) Always recommended for accounting information systems
d) none of the above

41. Which of the following types of errors will check digits usually detect?
a) Transposition of two digits
b) Inaccuracy of one digit
c) Double mistakes cancelling out each other
d) Fraudulent data
42. Which of the following is NOT normally used as a control total to check the validity
of data processing activities?
a) Edit tests
b) Batch totals
c) Record counts
d) Hash totals

43. From the standpoint of computer fraud, which type of controls would probably be of
highest importance?
a) Input controls
b) Access controls
c) Output controls
d) Processing controls

44. Tape and disk output controls are primarily concerned with:
a) The storage space problem
b) Building control totals
c) Validating checksums
d) The encoding process

45. Principle output controls include all but one of the following:
a) Validation of processing results
b) Character control totals
c) Strict regulation of preprinted forms
d) all of the above

46. Which of the following is NOT a control to ensure the physical safety of a company's
data processing center?
a) Strategic placement of the computer center
b) The use of password codes
c) The use of identification badges
d) all of the above are computer facility controls

47. The least effective physical security control for a computer center is:
a) Limited employee access
b) Color-coded ID badges
c) Insurance
d) Strategic placement of computer center equipment

48. Which of the following is an example of application controls in automated data

processing systems?
a) Input controls
b) Hardware controls
c) Documentation procedures
d) Controls over access to equipment and data files

49. An expense report was prepared by a company's cost center. One executive
questioned one of the amounts and asked for "the source documents which support the total."
Data processing was not able to routinely do so. The best control procedure would be:
a) An error listing
b) An audit trail
c) Transmittal control
d) Documentation

50. Daylight Corporation's organization chart provides for a controller and an information
processing manager, both of whom report to the financial vice-president. Internal control would
not be strengthened by:
a) Assigning the programming and operating of the computer to an independent control group
which reports to the controller
b) Providing for maintenance of input data controls by an independent control group which
reports to the controller
d) Providing for review and distribution of computer output by an independent control group
which reports to the controller

51. Fault-Tolerant systems are typically based on the concept of:

a) Redundancy
b) Consistency
c) Materiality
d) Fairness

52. An apparent error in input data describing an inventory item received was referred
back to the originating department for correction. A week later the department complained that
the inventory in question was incorrect. Data processing could not easily determine whether or
not the item had been processed by the computer. The best control procedure would be:
a) Input edit checks
b) Missing data validity check
c) Transmittal control
d) An error log

53. The basic form of backup used in magnetic tape operations is called:
a) Odd parity check
b) Dual-head processing
c) File protection rings
d) The grandfather-parent-child procedure

54. Control totals are used as basic a method for detecting data errors. Which of the
following is NOT a control figure used as a control total in automated accounting systems?
a) Non-financial totals
b) Check-digit totals
c) Hash totals
d) Financial totals

55. The grandfather-parent-child approach to providing protection for important

computer files is a concept that is most often found in:
a) Online, real-time systems
b) Manual systems
c) Magnetic tape systems
d) Magnetic disk systems

56. ______ permit data to be written on a magnetic tape.

a) File protection rings
b) lock out procedures
c) Rollback processing
d) Fault- tolerant systems

57. A technique for controlling identification numbers (part number, employee number,
etc.) is:
a) Self-Checking (check) digits
b) Echo checks
c) Parity control
d) File protection

58. In its automated data processing system, a company might use self checking numbers
(check digit) to enable detection of which of the following errors?
a) Assigning a valid ID code to the wrong customer
b) Recording an invalid customer's ID charge account number
c) Losing data between processing functions
d) Processing data arranged in the wrong sequence

59. Which of the following would lessen internal control in an automated data processing
system?
a) The computer librarian maintains custody of computer program instructions and detailed
listings
b) Computer operators have access to operator instructions and detailed program listings
c) The data control group is solely responsible for the distribution of all computer output
d) Computer programmers write and debug programs which perform routines designed by the
systems analyst

60. Which of the following best describes a fundamental control weakness often
associated with automated data processing systems?
a) Automated data processing equipment is more subject to systems error than manual
processing is subject to human error
b) Automated data processing equipment processes and records similar transactions in a similar
manner
c) Automated data processing procedures for detection of invalid and unusual transactions are
less effective than manual control procedures
d) Functions that would normally be separated in a manual system are combined in an automated
data processing system

61. A company uses the account code 669 for maintenance expense. However, one of the
company's clerks often codes maintenance expense as 996. The highest account code in the
system is 750. What would be the best internal control check to build into the company's
computer program to detect this error?
a) A check for this type of error would have to be made before the info was transmitted to the
data processing center
b) Valid-character test
c) Sequence test
d) Valid-code test

62. The magnetic tape containing accounts receivable transactions could not be located.
A data processing supervisor said that it could have been put among the scratch tapes available
for use in processing. The best control procedure would be a(an):
a) Header label
b) Trailer label
c) External file label
d) File protection ring

63. A sales transaction document was coded with an invalid customer account code (7
digits rather than 8). The error was not detected until the updating run when it was found that
there was no such account to which the transaction could be posted. The best control procedure
would be:
a) Parity checks
b) Keypunch verification
c) A hash total check
d) A check digit

64. The operator, in mounting the magnetic tape containing the cash receipts for the
processing run to update accounts receivable, mounted the receipts tape from the preceding
rather than the current day. The error was not detected until after the processing run was
completed. The best control procedure would be a:
a) Header label check
b) Trailer label check
c) Parity check
d) Hash total check

65. The master inventory file, contained on a removable magnetic disk, was destroyed by
a small fire next to the area where it was stored. The company had to take a special complete
inventory in order to re-establish the file. The best control procedure would be:
a) Fire insurance
b) Data processing insurance
c) A copy of the disk
d) Remote storage of a copy of the disk and the transactions since the disk was copied

66. The master file for inventory did not seem right. The file was printed out and many
errors were found. The best control procedure would be:
a) Trailer label control totals
b) A periodic test against physical count
c) A parity check
d) Limit tests

67. Due to an unusual program error which had never happened before, the accounts
receivable updating run did not process three transactions. The error was not noted by the
operator because he was busy working on another project. There were control totals for the file
which were printed out. An examination of the printout would have disclosed the error. The best
control procedure would be:
a) An error message requiring operator response before processing continues
b) Reconciliation of control total by control clerk
c) Internal audit review of console log
d) Label checking by next computer program

68. A CPA reviews a client's payroll procedures. The CPA would consider internal
control to be less than effective if a payroll department supervisor was assigned the responsibility
for:
a) Distributing payroll checks to employees
b) Reviewing and approving time reports for subordinate employees
c) Hiring subordinate employees
d) Initiating requests for salary adjustments for subordinate employees

69. it would be appropriate for the payroll accounting department to be responsible for
which of the following functions?
a) Approval of employee time records
b) Maintenance of records of employment, discharges, and pay increases
c) Preparation of periodic governmental reports as to employee's earnings and withholding taxes
d) Distribution of paychecks to employees

70. In designing a payroll system it is known that no individual's paycheck can amount to
more than $300 for a single week. As a result, the payroll program has been written to bypass
writing a check and printing out an error message if any payroll calculation results in more than
$300. This type of control is called:
a) A limit or reasonableness test
b) Error review
c) Data validity test
d) Logic sequence test
 71. A weekly payroll check was issued to an hourly employee based on 98 hours worked
instead of 38 hours. The time card was slightly illegible and the number looked somewhat like
98. The best control procedure would be:
a) A hash total
b) A code check
c) Desk checking
d) A limit test

72. In preparing payroll checks, the computer omitted 24 of a total of 2,408 checks which
should have been processed. The error was not detected until the supervisor distributed the
checks. The best control procedure would be:
a) A parity check
b) A module N check
c) Control totals
d) Desk checking

73. When erroneous data are detected by computer program controls, such data may be
excluded from processing and printed on an error report. The error report should most probably
be reviewed and followed up by the:
a) Supervisor of computer operations
b) Systems analyst
c) Data control group
d) Computer programmer

74. Jonkers, Inc., a large retail chain, is installing a computerized accounts receivable
system employing a batch mode of processing with sequential files. The program which will
process receipts on account should include an input edit routine to assure:
a) Proper sequencing of data
b) Header and trailer label accuracy
c) The amount received is recorded correctly
d) The existence of control totals
e) Proper operator intervention

75. In order to maintain good internal control within the computer department:
a) Computer operators need to be good programmers
b) Programmers should have control over day-to-day production runs
c) Computer operators should be allowed to make changes in programs as needed in order to
keep the computer running
d) Programmers and computer operators should be in separate departments
e) the tape librarian should be able to operate the computer
 True – False Questions Multiple Choice Questions
1 F 18 T 27 D 44 D 61 D
2 T 19 F 28 D 45 B 62 C
3 T 20 T 29 B 46 B 63 D
4 F 21 T 30 B 47 C 64 A
5 F 22 F 31 D 48 A 65 D
6 F 23 T 32 D 49 B 66 B
7 F 24 T 33 D 50 A 67 B
8 F 25 F 34 D 51 A 68 A
9 F 26 F 35 C 52 D 69 C
10 F 36 D 53 D 70 A
11 T 37 D 54 B 71 D
12 T 38 C 55 C 72 C
13 T 39 D 56 A 73 C
14 F 40 D 57 A 74 A
15 T 41 B 58 B 75 D
16 T 42 A 59 B
17 F 43 A 60 D