END-OF-SEMESTER EXAMINATION

SEMESTER 2, 2004/2005 SESSION

KULLIYYAH OF ECONOMICS AND MANAGEMENT SCIENCES

Programme : ENM/BACC/BBA/BECONS Level of study : 3

Time : 9.00 am – 12.00 noon Date : 25.3.2005

Duration : 3 hours

Course Code : ACC 3310 Section(s) : 1-3

Course Title : Accounting Information Systems

(This Question Paper Consists of 9 Printed Pages with 2 Sections)

INSTRUCTION(S) TO CANDIDATES

DO NOT OPEN UNTIL YOU ARE ASKED TO DO SO

1. ANSWER ALL QUESTIONS.

Any form of cheating or attempt to cheat is a serious offence which may

lead to dismissal.

APPROVED BY:
 SECTION A: MULTIPLE CHOICE QUESTIONS

1. A move ticket
a. is the formal plan and authority to begin production
b. specifies the materials and production required for each batch
c. records the work done in each work center
d. authorizes the storekeeper to release materials to work centers

2. Inventory control performs all of the following tasks except it

a. provides production planning and control with the inventory status report of
finished goods
b. updates the raw material inventory records
c. prepares a materials requisition for each production batch
d. records the completed production as an increase to finished goods inventory

3. Which of the following is not an assumption of the Economic Order Quantity

model?
a. demand for the product is known with certainty
b. total cost per year of placing orders is fixed
c. lead time is known and is constant
d. there are no quantity discounts

4. A fundamental principle of responsibility accounting is that

a. managers are accountable only for items they control
b. a manager's span of control should not exceed eight people
c. structured reports should be prepared weekly
d. the information flow is in one direction, top-down

5. Which of the following management principles affects the management reporting

system?
a. formalization of tasks
b. authorization
c. span of control
d. all of the above

6. The level of management that makes tactical planning decisions is

a. top management
b. middle management
c. operations management
d. front-line management

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7. Goals of ERP include all of the following except
a. improved customer service
b. improvements of legacy systems
c. reduced production time
d. increased production

8. Which of the following statements is not true?

a. In a typical two-tier client server system, the server handles both application
and database duties.
b. Client computers are responsible for presenting data to the user and passing
user input back to the server.
c. In three-tier client server architecture, one tier is for user presentations, one is
for database and applications, and the third is for Internet access.
d. The database and application functions are separate in the three-tier model.

9. Which statement about ERP installation is least accurate?

a. For the ERP to be successful, process reengineering must occur.
b. ERP fails because some important business process is not supported.
c. When a business is diversified, little is gained from ERP installation.
d. The phased-in approach is more suited to diversified businesses.

10. Legacy systems are

a. old manual systems that are still in place.
b. flat file mainframe systems developed before client-server computing
became standard.
c. stable database systems after debugging.
d. advanced systems without a data warehouse.

11. HTML
a is the document format used to produce Web pages.
b. controls Web browsers that access the Web.
c. is used to connect to Usenet groups on the Internet
d. is used to transfer text files, programs, spreadsheets, and databases across
the Internet.

12. One advantage of network technology is

a. bridges and gateways connect one workstation with another workstation
b. the network interface card permits different networks to share data
c. file servers permit software and data to be shared with other network users
d. a universal topology facilitates the transfer of data among networks

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13. The client/server technology
a. increases the amount of data that is transmitted between the central file and
the network node
b. eliminates the need for nodes to communicate with each other
c. reduces the number of records that must be locked by having the file server
perform record searches
d. functions only with a ring and bus topology

14. Supervision in a computerized environment is more complex than in a manual

environment for all of the following reasons except
a. rapid turnover of systems professionals complicates management's task of
assessing the competence and honesty of prospective employees
b. many systems professionals have direct and unrestricted access to the
organization's programs and data
c. rapid changes in technology make staffing the systems environment
challenging
d. systems professionals and their supervisors work at the same physical
location

15. Which statement is not correct? The audit trail in a computerized environment
a. consists of records that are stored sequentially in an audit file
b. traces transactions from their source to their final disposition
c. is a function of the quality and integrity of the application programs
d. may take the form of pointers, indexes, and embedded keys

16. A software program that replicates itself in areas of idle memory until the system
fails is called a
a. Trojan horse
b. worm
c. logic bomb
d. none of the above

17. In an electronic data interchange environment, customers routinely

a. access the vendor's accounts receivable file with read/write authority
b. access the vendor's price list file with read/write authority
c. access the vendor's inventory file with read-only authority
d. access the vendor's open purchase order file with read-only authority

18. Which of the following is correct?

a. check digits should be used for all data codes
b. check digits are always placed at the end of a data code
c. check digits do not affect processing efficiency
d. check digits are designed to detect transcription and transposition errors

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19. An example of a hash total is
a. total payroll checks–$12,315
b. total number of employees–10
c. sum of the social security numbers–12,555,437,251
d. none of the above

20. An example of a nonfinancial transaction is

a. sale of products
b. cash disbursement
c. log of customer calls
d. purchase of inventory
[Total: 20 marks]

SECTION B: SHORT QUESTIONS/CASE

Question 1

Instruction: select the most appropriate word from the box to be used in the question.

Push Batch Production system

Pull ABC Costing Cost accounting
Cells Standard Costing Bill of materials (BOM)
Route sheet Move ticket Production schedule
Job time ticket Material Requisition form Purchase Order

a. In the ____________________ approach to manufacturing, the sales forecast drives

the production plan and goods are produced in large batches.

b. With the pull approach to manufacturing, factory machinery is arranged

in____________.

c. A(n) _______ attempts to assign costs to products based on the amount of service
operations, such as purchase order preparation, material handling, storage time, wait
time, and other nonvalue-added processes, that the products consume.

d. ____________________ is a manufacturing philosophy or business strategy for

designing production systems that are more responsive to precisely timed customer
delivery requirements.

e. The ___________ system is concerned with the flow of costs through the factory.

f. A(n)__________ contains the standard material quantities that are required to

produce one unit of end product.

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g. A(n)_______________ shows the sequence of operations to manufacture an end unit
and the standard labor or machine hours for each operation.

h. The record of completed assembly line activities is referred to as a(n)

________________.

i. The ____________________ authorizes the factory to begin manufacturing specific

products.

j. The ____________________ shows the jobs on which the factory worker has
worked.

[Total: 10 marks]
Question 2

a) Discuss THREE control issues in General Ledger/Financial Reporting Systems.

[3 marks]

b) Explain two types of coding schemes and give examples of their use.
[3 marks]

c) Explain how the Management Reporting System assists in the implementation phase of
the decision-making process.
[2 marks]

d) Draw a simple diagram depicting the relationship between the general ledger master
file, control accounts, subsidiary files, and financial statements. (choose one account as
your example. e.g. Fixed Assets account)
[2 marks]

[Total: 10 marks]
Question 3

a) Explain the “Big Bang” method in implementing ERP. What is the main problem in
adopting this approach?
[4 marks]

b) If an auditor suspected an “unusual” relationship between a purchasing agent and

certain suppliers, how could a “drill-down” method (in analyzing data) assists in the
investigation?
[3 marks]

c) What are the implications of ERP for internal control and auditing?
[3 marks]

[Total: 10 marks]

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Question 4

(a) The following facts pertain to the e-commerce Website for KEJORA Computer, a
personal computer manufacturer and seller.

Privacy statement
a) All information collected on this website will be used only for legitimate business
purposes. We do not give away or rent any information to third parties.
b) We will only contact you for legitimate business purposes, possibly from time to
time, as needed. Please be 100% assured that all transactions between you and us
are held in the strictest confidence.

Disclosure of Business Practices, Shipping and Billing

a) All items will be shipped at the earliest possible date.
b) You are not required to accept items that you did not order.
c) All invoices are generated on the first day of the month.
d) In the event that you are accidentally billed twice for the same item, you will
immediately be issued a refund.

Transaction Integrity
a) We thoroughly audit at least 10% of all transactions for accuracy and integrity.
This ensures that our system is working properly.
b) All transactions are encrypted by the latest encryption standards.

Required

Evaluate these statements in term of how well the stated policies promote customer trust
and confidence in KEJORA’s on-line business.
[7 marks]

(b) Contrast a LAN and a WAN. Typically, who owns and maintains a WAN?

[3 marks]

[Total: 10 marks]

Question 5

a) List three pairs of system functions that should be separated in the centralized
computer services organization. For each pair, describe the risk exposure if the
functions are not separated.
[6 marks]

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b) Auditors examine the physical environment of the computer center as part of their
audit. Many characteristics of computer centers are of interest to auditors. What are
they? Discuss.
[4 marks]

[Total: 10 marks]
Question 6

a) Despite the obvious convenience of personal computers, significant risks exist. Discuss
THREE of the risks and suggest possible control techniques.
[6 marks]

b) TEGUH Manufacturing has a large computer department. A routine investigation by

the internal audit staff revealed that several customer accounts are phony and that
several accounts with excess balances could not be traced to the names, addresses and
contact number listed on the accounts. Additional investigations revealed that there
was no credit application on file for these individuals. To make things more
complicated, all of these accounts were 12 months overdue. For some reason that had
not yet been ascertained, none of these accounts appeared on the accounts receivable
aging reports.

Required:

Explain the fraud that has probably been committed here. Which individuals are the
ones most likely to have been involved?

[4 marks]

[Total: 10 marks]

Question 7 – Case

WORKS Sdn. Bhd. is an industrial machinery and equipment manufacturer with several
production departments. The company has a large repair and maintenance department
(R&M) for servicing the automated and heavy equipments in its production departments.
However, the operating efficiency of R&M has deteriorated over the past two years. The
assistant controller has reviewed the operations of R&M and has come out with the
following proposal on how to improve the efficiency of R&M:

The production department would prepare a service request in 4 copies, and submit 3
copies of the service request to R&M for the repairs and/or maintenance to be completed,
including a suggested time for having the work done. The supervisor of R&M would
prepare a cost estimate on the service request for the work required (labor and materials)
and indicate a suggested time for completing the work on the service request. R&M’s
supervisor would return 2 copies of the request to the production department that initiated
the request, and file another copy in R&M.

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Once the production department approves the work by returning a copy of the service
request, R&M’s supervisor would prepare a repair and maintenance work order (in 4
copies) and schedule the job. The work order provides the repair worker with the details of
the work to be done. Copy 1 of the work order would be sent to the production department
to acknowledge the actual scheduling of the job. Copy 2 would be kept by R&M in a file
of scheduled jobs that acts as a reference file for all work orders while the job is in process.
The remaining copies would be used by the repair workers to perform the job and for
recording the actual hours spent and the actual materials and supplies used to complete the
job.

Once the job is completed and all actual data has been recorded on the work order, Copy 3
would be forwarded to the Accounting Department for costing purpose. R&M would then
attach Copy 4 with Copy 2 and file in a completed work order file.

You are required to prepare a logical data flow diagram and a flowchart for the
above procedure.

[Total: 20 marks]