Raleigh, NC CIA Review Course 2020 “New Exam Format” Part OT Business Knowledge for Internal Auditing | Garland Granger, CPA, CIA, CFE Professional Accounting Seminars, Inc. 55406 Garden Lake Drive 2H Greensboro, NC 27410 336.681.7397CIA Review - Part 3° Business Knowledge for Internal Auditing Table of Contents Summary of Part 3... Guidance for Multiple-Choice Questions. Guidance for Exam Preparation... ‘Study Unit 4 - Strategic Management and Planning .... ‘Study Unit 2 - Organizational Behavior and Performance Measures. Study Unit 3 - Leadership, Organizational Structures, and Processes..... ‘Study Unit 4 — Project Management and Contracts. ‘Study Unit 5 - Workstations, Databases, and Applications.. Study Unit 6 — IT Infrastructure. ‘Study Unit 7 ~ IT Framework and Data Analytics... ‘Study Unit 8 ~ Information Security and Disaster Recovery..... Study Unit 9 - Concepts & Underlying Principles of Financial Accounting... 74 ‘Study Unit 10 - Advanced Financial Accounting Concepts & Analytics...... 88 Study Unit 11 - Current Asset Management... 99 Study Unit 12 - Capital Structure & Budget, Taxation, & Transfer Pricing....109 ‘Study Unit 13 - Managerial Accounting: General Concepts..... 118 ‘Study Unit 14 — Managorial Accounting: Costing Systems & Decisions... 134Summary of Part 3 1. The CIA exam for Part 3 includes 100 multiple-choice questions and has 2.0 hours to complete the exam. 2. Content specifications Percentage ‘Study Tested Units Business Acumen 35% 1-4,74 Study Units 1-4, 7 Information Security 25% 8.1-83 Study Unit 8 Information Technology 20% 5-7,8.4 Study Units 5-8 Financial Accounting 20% 9-14 Study Units 9 - 14 Preparatory Information The material in this manual comes from Gleim’s GIA Review book. There are 14 study units in his book. There are 14 corresponding study units in these notes. The notes are intended to highlight the key information that you should know in order to pass the exam from each of the Gleim study units. You should go through the outlines in this manual prior to reading the study units in Gleim's book. Once you have read both portions, you should then answer the questions at the end of the study units in Gleim. You should also note that the sentences in the manual that come directly from the Standards will be in bold letters. Key words or phrases will also be in bold letters because they are important to know. Instructor Contact Information You can contact Garland at his email address — ggrange2@triad 1r.com or call him at 336.681.7397 if you have any questions or recommendations for improvement in the review course.Guidance for Multiple-Choice Questions Multiple-Choice Questions Techniques There are several techniques used to prepare a multiple-choice question for the exam. It is important to be able to recognize the type of question being asked. The following list contains several of these techniques. A. Asstraight knowledge question. There are no tricks to answering these questions. You need to know the material to get them right. B. Application questions require that one apply the concepts in a given situation. These are the more difficult questions. C. A true or false question. “Which of the following answers is false with respect to ............. (OF it could be which is true)". Remember that if the question asks for a false answer, three of the answers are true and if they ask for a true answer, three of the answers are false. D. The use of NOT or EXCEPT FOR within the question. “All ofthe following answers are correct except for... E. The use of the words “primary, objective, or primary objective”. The answer generally will be the broadest answer. Normally, when you see this type of question, you will have one answer that is the objective and three answers with an application of the concept with a procedure. A procedure is not an objective. F. One type of question will require that you know that three of the answers are incorrect more than knowing that the fourth answer is correct. The question was not written so that you knew the correct answer but that you recognized that the other three are will not work G. _ Anincomplete answer is not necessarily a wrong answer. For example, the objective of internal audit is to add value and improve operations. if the answer to a question regarding the objective of IA only listed one of the two objectives and no other answer listed both, then the one listed objective would be the correct, but incomplete, answer. Warnings and Advice A. Avoid answers with the words All, Always, and Only. They are too limiting since there are often options in everything we do in internal audit. Rarely are those words used in a correct answer. B. For long questions, read the last sentence from the body of the question first to determine the content of the question. Then read the information after reading the last sentence looking for the purpose of the question. C. For really long questions, | recommend that you skip them until you have completed all of the shorter questions because they can use up too much time. Do the long questions last. D. Rank the questions as a 1, 2, or 3. A“1” question is defined as one when you know the correct answer. Answer that question immediately. A “2” is any question when you have eliminated one or two answers but arenot sure of the correct answer. On a sheet of paper, write down the number of the question and the possible correct answers. Skip it until you have completely answered all of your 1s. A*3"is any question that is extremely long or for which you have no idea about the answer. Mark it as a 3 and do those questions last. Never leave them blank and try to determine if any answers might be eliminated because of certain words such as all, only, or always in an answer. This approach will help you focus first on the questions that you know. Then you can focus on the questions when you have eliminated one or two answers. By the time you review these questions, the nerves will be gone and your mind will be clearer. Also, by working the questions you know first, you may remember the information needed to answer a 2 question. You are on your own with a 3 but you should think about the question and examine the answers to determine if you can eliminate an answer or two. You do not want to waste time on these questions. Remember that before you work a 3 you should work the long questions that you skipped earlier if you think you can solve the question.How A. Guidance for Exam Preparation to Prepare for the Exam My manual is an outline of the main points from the Gleim study units (7) that one must know to pass the exam. You must realize that there is a difference between understanding and learning. My only objective is to help you understand the material that could be tested. Your goal is to then leam the material sufficiently to pass the exam. Learning involves studying the material and working additional questions until you fee! comfortable that you know the material. My approach is to lecture on the material in a study unit followed by working selected multiple-choice questions to reinforce your understanding of the material. After we finish the course, your responsibility is to learn the material we have covered together. The question most often asked of me is “How much time should | spend preparing for the exam?" My answer is very simple. The best way to determine the amount of time you might need to study will be dictated by the percentage of questions you answer correctly during the course. If you get a high percentage of the questions correct that we work together, you probably have a good understanding of the material. You will only need to reinforce this material by studying the notes and working additional questions until you feel comfortable with your knowledge base. If, on the other hand, you miss a high percentage of the questions we work together, you probably do not have a good understanding of the material. As we discuss the questions during the class, your goal is to make sure you understand why you missed the question. In my estimation, you will need to spend more time on that subject studying the notes and working many more questions to reinforce the learning process. I cannot easily give you a number of hours that you should prepare because it will be based upon the information in B above. However, to be on the safe side, | would attempt to spend about 3 hours per study unit outside of this course. You may find that on some study units, you will need less time and on others you will need more time. Study until you feel comfortable with the entire 2body of information tested. Try not to have any weaknesses in any subject area. — However, one must realize that one does not need to know 100% of the material included in Gleim. Itis very important that you know all of the material in the notes of this course since they represent about 92 — 96% of what is normally tested. ‘Assuming you are using the Gleim manuals, | always recommend that you read the answers to each multiple-choice question even if you get the answer correct. By learning why three of the answers are incorrect, you are also leaming the material so that you will not miss that question in the future. Always read Gleim's answers. Within the body of my notes, any complete sentence in bold italics will come directly from the StandardsStudy Unit 1 Strategic Management and Planning Strategic Management and Planning mo ‘Strategic management relates to long-term planning and affects senior management the most. 1. The labor force is constantly changing. 2. One must examine social trends and demographics that help create threats or opportunities. Market oriented versus product oriented business. 1. Amarket oriented business look at the long-term strategic business as defined by the goal of being in business. 2. Aproduct oriented business defines the products it produces and sells. The process is as flows: Develop a mission statement for the company. 5 ‘SWOT analysis — evaluates Strengths, Weaknesses, Opportunities, and Threats. 3. Do strategic planning. 4. Implementation of the plan. 5. Control over the plan. Management puts a lot of attention into forecasting. Synergy happens when two combined organization's businesses fit It occurs when the sum of the two businesses is greater than the parts. There are four types of synergies. 1. Market - goods or services complement one another. 2. Cost — reduces overall cost of running the business. 3. Technological — application programs that work together well. 4 Management - styles and culture of the businesses must fit. Operational strategy uses resources for the plan. 1. Cost — low cost producer. 2. Quality — product or process quality. 3. Delivery — cost is higher when the buyer demands speed of delivery. 4. Flexibility — offering many different products and services. 5. Service — service becomes a competitive advantage. ‘Structural Analysis of Industries A. Porter developed a model with five competitive forces at work. This is Tefered to as Porter's Five Competitive Forces. Rivalry — always tough when there are many competitors. Price cutting, advertising, and new products from competition affect the company. 2. Threats or barriers to entry. a. Economies of scale are not satisfied.WV. ‘Compatitive Ani b. Brand identity is weak. ¢. Cost switching of suppliers is low. d. Proprietary products are few. 3. Threat of substitutes — substitutes are similar products that can be substituted for each other based on price. 4. Threat of buyer's bargaining power which when it increases, the appeal of this industry decreases. Buyers want lower prices and better quality. 5. Threat of supplier's bargaining power — the appeal to potential entrants is weak. Competitive Strategies While the individual company determines most of its income, the position of the company in the industry is very important. ‘There are several operational types of strategies. 1. Gost one is a low cost provider. 2. Flexibility - one offers many different types of products. 3. Service —one provides the best service. 4, ‘Quality — one offers a better quality product based upon the production process. Cost leader is a strategy of a company that seeks to have an advantage through lower prices. A cost leader is highly structured to achieve close control of cost. A cost leader has high sales, low profit margins, and dominates the market in sales. Differentiation is a strategy to have an advantage by producing a unique product or service. It creates the perception that there are few substitutes. Therefore, it is easier to pass on cost increases to the customer. Cost focus is a strategy that seeks an advantage through lower costs but with a very narrow scope such as a regional firm. Focused differentiation is a strategy that seeks an advantage through unique products or services but with a narrow scope. Market-based strategies 1. Market leader is a company that seeks to expand the total demand for their products or services by introducing new items for sale. 2. Market challenger determines its strategic objective and specific targets. 3. Market followers are used by companies that do not want to challenge the leader but they introduce imitation products. 4. Market niche is a small or mid-size firm that competes in small markets. 5. Firm orientations focus primarily on the product. is Competitive intelligence deals with protecting data on the kinds of information to be collected, sources, and persons responsible.Customer value analysis allows competitive intelligence to create effective competitive strategies that target the appropriate competitors. 1. The starting point is customer value analysis — customers choose from competitor's products or services the brands that provide the greatest customer value. 2 The starting point is: Determine what your customer's value. b Assign quantitative amounts to the elements customer's value and have customers rank orders them. c Evaluate how well the company and its competitors perform relative to each element. da. Focus on performance with respect to each element compared to the competition. Repeat these steps as things change. Integration and diversification — one diversifies to grow, improve profits, and manage risk. Diversification occurs when the combination of formerly ‘separate elements has a greater effect than the sum of the individual effect. a Vertical integration - upstream where a company buys a business that improves their strategic plan such as a supplier. 2. Horizontal integration is the acquisition of competitors. 3. Concentric diversification results from developing or acquiring related businesses that do not have products, services, or ‘customers in common. 4 Horizontal diversification is the acquisition of businesses making products unrelated to your offerings but that might be demanded by your customer. 5. Conglomerate diversification is buying a wholly unrelated company. The growth share matrix looks are components of a business as a form of strategic business units and evaluates the potential of each business using a matrix. 1. The evaluation compares high or low market growth rate (MGR) on one side of the matrix and a high or low relative market share (RMS). The four quadrants are as follows. a. Low RMS, low MRG - these are called dogs. b. Low RMS, High MGR — these are called question marks. c. High RMS, low MRG — are called cash cows. d. High RMS, high MRG - are called stars. v. Paneer B. Globalization refers to the manner in which concepts, information, data, investments, and trade run throughout national bounders. There are three aspects of globalization fe Cognitive — one must understand various cultures differences and how to adjust to those differences.@. One of the issues in globalization in foreign markets is balancing the customizing of the product to fit the local market and meeting the standardization requirements of the country. One size fits all mentality does not work well 2. Social — building business relationships with individuals in the various cultures. 3. Psychological — understanding different ways of thinking in various cultures and methods of coping with uncertainty. Multinational companies (MNC) are global, transnational or even stateless countries. Many multinational companies are: 1. Geocentric — truly intemational and understand and accept the very best of different cultures. 2. Ethnocentric — identifies with their own country only. 3. Polycentric ~ focuses on the host country's markets where control is local. Foreign market entry strategies 1. Global outsourcing — utilizing cheap labor and materials in other countries Licensing — acquire a license in another country to sell product. Exporting — selling product to another country. Indirect export strategies — works with middle person companies within the host country to sell product. It requires very low investment and has much less risk because of the expertise of the intermediary companies. 5. Direct investment — owns companies in another country. There are many advantages in this approach. a. Cheaper labor and materials. b. Government incentives, ¢. Relationships with parties in the country. d. Better control, e. _ Better market access. 6. Local storage and sales arrangement — manufactures in one country then ships it to third country. 7. Local components assembly — one ships parts from one country to another. Then they are assembled and sold in the second country. 8. Multiple or joint ventures between businesses in separate countries. The Global Environment A. Global markets face the same management issues as most local companies, 1. Economic — such factors as income-per-capita, competiveness, productivity are major economic concems when dealing with another country. PEN2. Political and legal environment ~ the risk faced by the political and legal environment must be considered prior to moving into another country. 3. Social and culture — understanding both the social environment and the culture can make or break international business. 4. ‘Communication — there is a difference between the folowing cutures: High-context cultures, such as Asian cultures, where nonverbal communication is vital to understand. b. Low-context cultures, such as North America, where communication is more related to words used. 5. Economic intelligence ~ the ability to watch, reason, interpret, and react to unfamiliar cultural issues. a. Examples would be dealing the European Union and such agreements as NAFTA and General Agreement on Tariffs and Trade. Strategies for global marketing organizations, Multinational strategy — adopt a portfolio approach that ‘emphasizes national markets. The focus is on national markets because global integration is needed in the market place. It works best because there are significant differences among various countries. 2. Global strategy — regards the world as one large market with the same products sold around the world. 3. Glocal strategy ~ combines elements of local responsiveness or adaptation with some elements of global integration such as telecommunication firms. Local responsiveness appeals to local tastes and preferences. It is homogeneous and economies of productive scale are large. 4. International strategies — the product is the same in every country but decision making is made in the home country. 5. Multilocal or multidomestic strategies - utilizes subsidiaries in other countries to control operations while the product is made for each country and decision making remains with the sub. The main problem for this strategy is that it often has higher costs and lower economies of scale. 6. __ Indirect export - one operates through home merchants who buy and sell products. 7. Regional strategies — the goal is to create regional products with a regional value chain to the customer.Study Unit 1 Strategic Management and Plani Questions 41. Which of the following is least likely to be an ‘example of synergy? Prove sforent produc end porto Siforent services. ase B.A car dealership providing warranties on ‘automobile parts to maximize customer value. ©. Amanufacturing company hiring a new ‘manager with technological experience lacking inthe company. Miitary Humvees being converted into sports Ltlty vehicles for sale to civikans, 2. Which ofthe folowing is amarkotorgntod jefintion of a business versus a product-orier 6.A strategic business unit (SBU) hes a high elative market share (RMS) and alow business growth rate (BGR), According tothe growth-share matrix for competive analysis created by the Boston Consulting Group, the Seu Is a Star. Question mark Cash cow. Dog. pomP 7. manufacturing company produces plate ute {ora particular segment atte lowest posable Gost The company is pursuing a cost oe ‘A. Leadership stratogy B. Focus strategy C. Differentiation strategy. . Containment strategy, 8, Businss sralegies may be characterized ther eflocts an operations Te oincton been A corpoct ar ad 9 Ky cr recs wich poral sraogy? A. cost ®. Flexbiy, ©. servo D. Qualy, Co ett ergs Beni oa —— oun snr Cost strategy. pope410, which ofthe folowing steps in the strategic planning process should be completed frst? A 8. ° D. ‘Translate cbjectves into goats, Detommine actions to achieve goais. Develop performance measures. ‘Create a mission statement 14, In acoordance with Michael E. Porter's generic ies model, @ frmwith a broad competitive Scope that has high sales volume, low margns, and fffizent supply and distibution channels will most likely choose 8 A 8. c b. Cost leadership strategy. Cost focus strategy, Differentiation strategy. Focused diferentiation strategy. 12. An advantage of a direct investment strategy when entering a foreign market Is. p 9B> Reduction in the capital at risk. ‘Shared control and responsibility, ‘Assurance of access when the foreign country imposes domestic content rules. ‘Avoidance af interaction with the jocal bureaucracy. 413. A global firm A c D. Hes achieved economies of scale in the firm's domestic market Plans, operates, and coordinates business globally Relies on indirect export. ‘Tends to rely more on one product market. 44. The least risky method of entering a market in 2 foreign country is by A c D. 45. Which strategy for a Indirect exports. Licensing. Direct exports. Direct investments. global marketing organization 1s based on a portolio of national markets? A ©. Creation of division to manage international marketing. ‘A mutational strategy. A glocal strategy. Creation of an export department. 20, Which ofthe following strategies ‘elements of muttinational, international, and muliiocal strategies? 416. Which of the folowing is correct regarding the impacts of a global strategy on an organization? 7 Globe Fis Product Production “One Cana Development "Gants __ County’ A Yen Yes Yes 8 No No No Ne No Yes Cn No 47. in a regional strategy, an organization has which of ihe following goals? ‘A. Tocombine the elements of multinational and international, but not multocal, strategies. B. To create a universal product and vale chain that serves the needs of al counts in which the fm operates, C. To combine the various operating segments of the organization based on be rogonin which they operate D. To create regional products and a regional value chain. 48, The disadvantage of a multiocal or mulidomestic strategy is that the company ‘A. Uses subsidiaries in the home country to ‘control operations. 'B. Adapts the product for the global market but ‘not for each county. ‘C. Makes decisions at a centraized location in the ‘home country. . Incurs higher costs and lower economies of seal 19. Davian Wood Products produces customized products for each country it operates in. AS a resut, it can be said that ‘A. Davian is using a multinational strategy and is ‘saving production costs B._Davian is using a global strategy and is, Incuring higher production costs. . Davians using an intemational strategy, resulting in convalzod decsion making D. Davian is using a multinational strategy and ‘incurring higher production costs. ‘combines ‘A. Mutidomestic strategy. B. Transnational strategy. CC. Alkencompassing strategy. D. Regional strategy.24. A fir wishing to sellits well-known brand of 25. Garrison Woodproduets and Mathis, ‘men's clothing in a certain foreign country redesigned ‘Woodproducts are the two largest wood product the products because of the grealar average size of ‘competitors in the United States, However, these two ‘consumers in that country. However, the firm retained ' work together to produce woodproducts the same basic advertising campaign. This firm has for Europe under the name of United Woodproducts, ‘adopted which adaptation What method are Garrison and Mathis using to ‘expand Into global markets? ‘A. Straight extension, B. Product adaptation ‘A. Exporting. ©. Forward invention eee D. Backward invention, eter eee: 1. Local component assembly. 22. Developing brand equity ina frogn mart may Gal hm auntie tow prodos in now kat ‘new prod ina now marke Prost tay ehoul A. Initially place most ofthe firn's emphasis on advertising geared to the local culture. B. Fully decentralize contol ofthe marketing process. Avoid creating partnerships with local distribution channels to avoid dilution of the brand. D. Balance standardization and customization of the product. ez 9 3B Bulez Widgets, Inc. operates globally and has praised for its abity to understand the noeds | wants of the local market while retaining global of certain elements of the marketing process. strategy. Bulez Hi ‘A. Establishing local guidelines so that local sales ‘and profit goals are met. BB. Maintaining a good ratio of standardization and customization. CC. Maintaining a good ratio of local to global contro D. None of the answers are correct 24. Which method of expanding into intemational, ‘markets is most likely the riskieat? A local storage and sale arrangement. Local component assembly, Direct investment. Joint venture pop>Study Unit 1 Strategic Management and Planning Answers 14, 15. 17. 18. 19. 20. 21 22 23. 24. 25. BRASLSNOMAGNS DOFOVGCIVWOVY SV eoNNg0wmDT00OwDyYStudy Unit 2 Organizational Behavior and Performance Measures Organizational Theory Basic concepts 1. Authority is the right to direct and expect performance from others to achieve the organization's goals and objectives. 2. Unity of command states every employee should report to only one manager with clearly defined responsibilities. B. Organizational charts represent the formal structure of the organization in two dimensions. 1. Vertical hierarchy indicates the chain of command from top to bottom as part of the reporting structure. 2. Horizontal hierarchy indicates the departmentation that are at the same level of the organizational chart. C. Theories of organizing 1. Humanistic perspective examines the individual, social, and group needs and behaviors. 2. Closed systems operate with the belief that there is a scientific approach to management where planning and control help the business predict the future with some degree of certainty. They are closed to external environmental effects on the business. a. The closed system is seen as having an authoritarian organization with a narrow span of control. 3. Open systems see themselves as attempting to survive in an environment that is filed with uncertainty. Business must quickly adapt to change. 4. Bureaucracy is a traditional style company and is based on a mnilitary style of management with division of labor, hierarchy of authority, and rules to govern the business. 5. Contingency approach comes from the open system that states that the design of the organization depends on things that will be discovered and studied in the future. D. Organizational performance relates to how productive and effective an organization can be in the area of profits and cost controls. Motivation - Nood-Based Theories and Rewards Motivation is the thing that drives an individual towards their behavior. B.Clasetcal view states that fear and economies (money) are key motivators of behavior. c. Behaviorist believes that all motivational strategies will only work for a short period of time or for those who do not have any other alternatives. It focuses on participation and personal involvement with employees. D. Masiow’s hierarchy of needs states that there are levels of need that must be met before an individual can go to the next level. The individualwill only rise to the level where there is an unmet need. There are five levels of needs. 1. Physiological needs — basic requirements of Ife such as food, water, and shelter. 2. Security or safety needs — a sense of being free from harm or loss of job or other basic needs. 3. Acceptance or affiliation needs — a need for love and affection and belonging to a group. 4 Esteem needs — the need to be valued and it is satisfied by power, status, and prestige. 5. _ Self-actualization needs ~ need to reach one's highest potential in life. It must be intrinsic or come from within the individual. E. MoGregor’s Theory Xand ¥ Theory X states that most people do not like to work. Therefore, people must be forced to work or at least coerced. It assumes that people like to be told what to do at work. 2. Theory Y states that work is a natural part of life. Since people really want to work, they can be self-motivated and they like to be rewarded for achievement. F. _ Herzberg’s Two-Factor Theory states that there are only two factors in motivation. These are called hygiene factors. satisfies — these are items that maintain performance but do not improve it. The lack of these items becomes a dissatisfier but the presence of them is expected. Examples would be salary, working conditions, supervision. 2. _ Satisfiers — these items do motivate employees and their absence is a dissatisfier but their presence is a motivator. Examples would be challenging work, recognition, growth as a person, and advancement. G. Rewards 1. Equity Theory states that individuals are affected by rewards that they perceive to be equitable when it is based upon their job compared to others. 2. Cognitive evaluation theory states that intrinsic rewards tend to be reduced when extrinsic rewards are provided for superior performance. a. Intrinsic rewards come from within for things such as knowing you did a good job, achievement, and responsibility. b. Extrinsic rewards come from outside such as pay, promotion, recognition, and better working conditions. | Motivation — Process-Based Theories, Behavior, Job Design, and Other A. Goal Setting Theory states that individuals respond best when they have ‘specific goals that are difficult to achieve, but possible. Their performance improves with the goals and when management helps them improve and provides rewards for goal achievement. 16on Expectancy Theory states that people have subjective ideas of the rewards from the job based upon hard work and beliefs as to what is valuable. A lot has to do with the individual's perceptions of the rewards. Behavior modification is founded upon reinforcement theory whether positive or negative. 1. Positive reinforcement is providing a reward that encourages good behavior. 2. Negative reinforcement punishes bad behavior after the fact. 3. Extinction withholds a reward. 4. Punishment creates a negative reward. Job design is a process of linking tasks to a job so that itis consistent with the goals of the organization. 1. These items avoid dissatisfaction: a. Realistic job previews — tell people what the job is like and what it requires. This should be in writing. b. Job rotation — having employees rotate to different jobs when the job itseff is boring c. Contingent time off- time off is earned by completion of tasks. 208 second idea is to adapt the job to the people. Job enlargement — used for repetitive, boring jobs to provide some excitement to the job when their work can be changed horizontally. b. Job enrichment - letting the employee participate in planning and control allows the employee to perform additional tasks. Designing the job 1. Job description lists the basic duties of the job as well as reporting relationships. 2. Job specifications : should list the abilities required for the job such as education, experience, etc. Recruitment involves the hiring of good people without any discrimination. Selection of employees 1. This part of the job involves reviewing the applications as well as. interviewing the potential employees and testing, if necessary. that are vertical within the organization's chart. Organizational Politics and Group Dynamics This is called impression management. Itis the pursuit of self-interest in the face of opposition whether real or perceived. Self-interest at Positive political behaviors include team building and networking when performing a task. 2. Negative political behaviors include threats and sabotage. Political tacticsJ. 1. Posturing is making a good impression by taking credit for someone else’s work. Empire building occurs when one is trying to gain greater financial controls to make themselves look better. Making the boss look good (sucking up). Collecting social |OUs — you do me a favor and | will do you a favor. Creating power and loyalty groups for survival. Engaging in destructive competition. Management must attempt to limit these behaviors because of the negative effect they can have on the company. One must create an open environment, focus on performance, and not model such bad behavior ‘or accept it. Groups have at least two people who interact with each other and recognize that they are part of a group with a common goal. Informal groups happen without management involvement and are a normal part of any business. In this case, employees have a tendency to migrate to others with like minds and interest. These groups: 1. Help satisfy self-esteem needs. 2. Involve most employees in at least one group. 3. React to peer pressure. 4. Tend to be small and very complex. Formal groups are based on work assignments within the company. They are usually put together by management. The group has a leader and a very formal structure in an attempt to accomplish the goal. Group commitment is based upon two factors. 1. Attractiveness as an outside appearance to individuals. 2. Cohesiveness — members tend to unite against outside pressures that could hurt the group. Conformity tothe group, Groupthink occurs as the tendency of the group to conform to the overall group thinking and ignore the individual. Groups are slower than individuals to make decisions and sometimes are less risk taking. They should be more creative than a single individual. One drawback is the loss of individual accountability. Individuals conform to the norms set within the group. Nn Pane Performance Measures: A. B. Performance measures can be both financial and non-financial in nature. Prefabliy fatios examine management's ability to make a profit. Return on investment (RO!) - Operating income Avg. Invested Capital Residual income — Operating income — target RO! Economic value added (EVA) measures the residual income adjusted for opportunity cost - After tax operating income — (initial investment X weighted average cost of capital. en4. Return on common equity— Net income — Preferred Dividends ‘Avg. Common Equity 5. _ Price-to-eamings ratio measures the impact that earnings have upon the price a stock. Market price of one share Earnings per share 6. Return on assets — ‘Net income Avg, total assets Vi. (neces Measures — Costs of Qual ity Conformance costs relates to an intemal cost to help prevent costs and cost appraisal. 1. Prevention avoids defects by properly training employees, preventive measures, constant redesign of products, etc. 2. Appraisal relates to statistical quality control charts, inspection and testing. Nonconformance costs relate to internal and external failure costs. 1. Internal failure costs happen when one discovers defects before shipment and has to rework the product. 2. External failure costs happens when a customer discovers the defective product and uses warranties, shipping cost incurred, lawsuits, etc. Vil. Performance Measures — Balanced Scorecard A The balanced scorecard approach uses critical success factors (CSF) as a means of measuring company performance and looking for best practices in industries. The critical success factors have four perspectives. 4. Financial performance. 2. Customer service. 3. Internal business processes. 4, Learning and growth from innovation.Study Unit 2 Organizational Behavior and Performance Measures Questions 4. Which ofthe following concepts is not consisient with the classical perspective on management? A. Each subordinate should only have one: superior. B._Superiors may have as many subordinates as Possible within the superiors span of control. ©. Employees may choose not to follow orders. . The hierarchy of auton shoud be precise defined. - i loa 2. Although bureaucracy is often perceived negatively by the public, bureaucracy is a feature of nearly every large company. Which of the folowing is sign that 2 bureaucracy is dysfunctional? A. Aciversity of jobs. B._ Rules that obscure responsibilty. ©. Alarge number of rules necessary for day to day operations. D. Obedience to authority 3. Which ofthe following is the best measure of productivity to use to evaluate several departments in Blarge retail store? |A, Number of customers served per employee per ay. B. Revenue per square fool ‘Number of units sold per department per day, D. Average number of units stocked per month per department. ° 4, Which of the folowing is true with rogard to the Contingency approach to solving problems within an organization? ‘A. The organization's environment plays the: largest roe in finding situationally determined answers. B._ The organization may be less adaptive when the environment is more uncertain. CC. The organization should search for a solution that con be used in all cases. 1D. The contingency approach is a scientific management perspective. 20 5, Frederick Herzberg postulated a two-actor theory (of human behavior that included salisfiers and Cissatistiors. Which of the following Isa cissatisfer? Promotion o another position Salary, Challenging work. Responsibility. com> 66. An employee's sel-actualzation need would be met by ‘tractive pension provisions. Challenging new jab assignments. ‘Good working conditions. Regular positive feedback. com> 7. ich fh lowing eas nad the scorn that employees may be motvated echovement of eceplance orestzom nine workplace’? ‘A. Equity theory, 8. Expectancy theory. CC. Noods hierarchy theory. D. Goalseting theory. 18, Which of the following is not an example of posite reinforcement of behavior? ‘A. Paying a bonus to employees who had no ‘absences for any 4-week period, B. Giving written warnings to employees after only every other absence, CC. Assigning a mentor to each employee who exhibits a desire to develop leadership skils, D. Having a lottery every month where 10% of the employees with no absences receive a US $200 bonus.8. Motivation is, A, The extent to which goal-specific performance 's recognized by supervisos, B. The extent to which individuals have the authonty to make decisions. C. The extent ofthe attempt to accomplish a specte goal D. The set of forces that stimulate enthusiasm and persistence. 410. Two managers were discussing ine merits of geal setting to rprove employee performance manager fel that spectic goals should not be ‘estabiishod and that, to provide for flexibility, only eralized goals should be used. The other manager {elt that spectic, cificut gosis produce the best results. As the discussion continued, other methods of goal sotting were identified. Select the best method {for seting goals. ‘A. The manager shoul prove generalized goal 8. The manage shoul solect spect, ciftout goals. ©. The employee should develop generalized ‘goals and obtain management concurrence, D. The employee should develop specific, citieut. goals and obtain management concurrence. 111. which of the following tactics may employees se when feeling that tneir individual power is. insignificant? 'A. Employees may engage in posturing by taking Credit for the work cf a comorker. 8. Employees may engage a dosrucive Sompottion by spreading false rua. 6. Employees may engage creating poner and faydly cigues wih cer coworker. . Employees may atempt to corcealercrs riage bya supesor order toa the own {ure advancement wit the corporation 42, Which of the following can be a limiting factor asgociated wit group decision making? A. Groups generally da not analyze problems in ‘enough depth. 8. tis very dificult to get individuals to accept decisions made by grougs. C._ Groups nave a sti ime ening the Important components of decision making, D. Accountability is dispersed when groups make decisions. 13, When compared to individuals, groups have advantages anc deadvantages for dedion making Whe ethene vegarang group aed eosin Advantage Disadvantage ‘A. Increased personal Disagreements do not ‘accountability surface because of pressures to conform B. Increased acceptance Takes more time to ‘fa decision by amtve ala decision particppants, ©. Takes less time to Lack of personal aftive at a decision accountability D. Increased diversity Reduced acceptance of of expertse decision by participants, 14, The following information pertains to Quest Co.'s Gold Division forthe year just ended: Sales us $311,000 Variable cost 250,000 Traceable fixed costs 0,000 Average invested capital 40,000 Imputed interest rate 10% ‘Quest's return on investment was, 10.00% 13.33% 27.50% 30.00% com> 15, Charlie's Service Co. is an automobile service center, For tre month of June, Charlie's had the following operating statistics’ Sales Us $750,000 Operating income 0 Net prof after taxes 6,000 Total assets avaiable 700,000 Shareholders’ equity 300,000 Cost of capital 8% Charlie's has a ‘A. Retum on investment of 6.67%, 8. Residual income of US $(6,000). ©. Return on investment of 8%. D._ Residual income of US $(10,000) 46, Avionios industrials reported at year end that Operating income before taxes forthe year equaled 08'$2,480,000. The frn’s weighted-average cost fof capital (WACC) is 724%. The carying amount ‘0f debt is US $1,300,000, and the camying amount Sf equity canta io US $8,800,000, The income tax fale Tor Aviones 830%, What I the economic value ‘added (EVA)? us $731,240 US $948,760 US $1,668,760 us $1,680,000 poe417. Selected information for Dayan Company is a6 follows: December 31, Yoar5 __Year6 Prelerred stock, 8%, par ‘US $100, nonconvertible, oncumutative US $125,000 US $125,000 ‘Common stock 300,000 400,000 Retained earings 75,000 185,000 ‘Accurnulated other ‘comprehensive income © 40,000 Dividends paid on prefered stock for year ended 10.900 10,000 "Netincome for year ended 80,000 120,000 Dayan’s retum on common equity, rounded to the nearest percentage point, for Year 6 Is A 16% B. 176% ©. 22% 0. 24% 48. The cost of statistical quality control in a product quality cost system is categorized as a(n) Internat fallure cost. Training cost. External failure cost. ‘Appraisal cost. pOR> 49. Which of the following balanced scorecard perspactives examings a company's success in targeted market segments? A. Financial 8. Customer C. Internal business process. D. Learning and growth. 20. Under the balanced scorecard concept, employee Satisfaction and retention are measures used under ‘which ofthe following perspectives? ‘A. Customer B._Intemal business, ©. Leaming and growth. D. Financial 24. Which of the folowing is one of the four perspectives ofa balanced scorecard’? A Justin time. B. Innovation. ©. Benchmarking, 1D. Activty-based costing. 2Study Unit 2 Organizational Behavior and Performance Measures Answers 12. 13. 14. 15. 16. 18. 19. 20 21. FPS ~@NooOsONS oO00RODMrAaDO x Bowmondwawawg 2BStudy Unit 3 Leadership, Organizational Structure, and Business Processes Leader A B. mo ship Styles Influence is any attempt to change the behavior of others. Influence tactics 1. Participative managers- exhibited by rational persuasion. 2. Authoritarian managers —upward influence used by employees of these managers ingratiating tactics and upward appeals. Power is the ability to make people do what you want. The types of power are: 1. Legitimate or positional power comes from the chain of command. 2. Expertise is due to expert abilities others might not possess. 3. _ Reference power comes from charisma or others identifying with the leader. 4. Coercive power is rooted in fear and threats. 5. Control of rewards is a means of power. Authority is the right to manage others. Traitist approach states that leadership is due to characteristics of the individual such as intelligence, scholarship, status, dependability, etc. Leader behavior or leadership style 1. Authoritarian — a dictator type leader where communication is downward to employees. 2. Democratic — delegates substantial authority to other employees. 3. Laissez faire ~ gives employees a free rein and lets them take | authority and responsibility. Communication is horizontal. | Situational theories 1. Contingency theory states that people become leaders because of personality traits and situational factors. 2. Situation leadership theory has the following characteristic: a. Selling — explains decisions and gives others a chance for lat rity. b. Telling — tells employees what to do and watches what they do. ©. Participating — encourages sharing ideas and decision making. 4. —_Delegating — turns over responsibility and implementation to others. 3. Path goal theory states that employees are motivated when management helps them determine their goals and provides a means to help the employee achieve the goal ‘Transformational leader combines tasks and people with factors such as charisma. These leaders inspire others to achieve at a high level. m4Charismatic leader is one who people will follow because he or she is humble, trusted, and is a servant-eader. People will willingly follow this leader. Transactional leader is task oriented and gets the job done efficiently and effectively. Servant leader is one who puts employees above themselves and seeks to help them become successful. They give credit and recognition to their employees first. Mentoring provides an employee with the time to walk beside another leader to leam first-hand how leaders lead. Organizational Structure The traditional or classical approach to organization design, known as the classical or traditional approach, emphasizes authority, responsibility, unity of command, hierarchy, and a narrow span of control. The behavioral approach emphasizes limits, strengths, availabilty, and interests of the people employed. Unity of objective is the basic structure of an organization that states that everyone in the company should have the same corporate objectives. Unity of command states every employee should report to only one manager with clearly defined responsibilities. Span of control is defined as the maximum number of people one can effectively and efficiently manage. There is no formula or magic method for choosing tis number. ‘The span can be narrow or wide depending upon the following: a. Is the work similar or very different? b. Are employees close or geographically dispersed? ©. _ Is the work simple or complex? d. How often do they need supervision? e. Planning needs. 2. Tall organizational structures have many layers of management and a narrow span of control. There is more interaction between employees and supervisors. However, they can be slower to make decisions, too much supervision, and lots of administrative costs. 3. _ Flat organizational structure has very few levels of management and a wide span of control. They are faster in decision making and employees get to make more decisions on their own. However, less supervision may mean poorer decisions due to lack of training. Line and staff design Line represents the reporting areas in the organizational chart from a vertical perspective. These individual have authority within the organization at each level of reportin 2. Staff'is the advisors within the business such as internal audit. They have no formal power or authority but act with line management to improve the business. 253. Authority is given to management by the position they occupy within the business. Mechanistic vs. organic structures. 1. Amechanistic organization has tight controls, division of labor, very formalized, and centralized in decision making. Itis inflexible and change is very difficutt for this structure. 2. An organic organization is decentralized, very flexible to change, and employees participate in decision making. New structures 1. Cluster organization is a group working as a team. 2. Network organization consists of relatively independent firms that work together. 3. Virtual organizations are value-added structures where employees are geographically dispersed but, through technology, are in constant contact with each other on the team. 4. Hourglass organization begins with strategic planning at the top, funneling down to few middle managers that are generalists, and finally emptying into the bottom layer by empowering employees. to do the best work possible. Dopartmentation Division of labor makes the complex simple through specialties within the business. 2. Departmentation can be by: a. Functional — by specialization such as marketing, finance, production. Territory. Products and/ or services. Customer. Project. Work flow process — re-engineering of a company. Contalze and Decentralized Organizations Centralized decision-making means that the decisions are made at the he top 20 one has a top down approach to problem sohng. There is uniformity of decisions especially for major decisions. b. Staff does not develop managerial skills since they do not make decisions. ©. Decisions take longer to make since information has to travel from the bottom to the top for a decision to be made. 2. Decentralized decision-making means that management pushes the authority down for those decisions at lower levels of management. a. Can result in an increase in morale. b. Decisions will be made faster and at the point of the problem. moaoe 26c. There can be conflicting decisions with the goals of the organization. Business Process - Human Resources and Outsourcing A Managing human resources involves acquiring, training, and developing employees in according with the strategic plan of the organization. 1. It must be people-centered in order to hire and develop good employees. Designing the job 1. Job description lists the basic duties of the job as well as reporting relationships. 2. Job specifications should list the abilities required for the job such as education, experience, etc. Selecting new hires isan important part of this job. Unstructured interviews ask questions without a particular framework of questions. 2. Structured interviews ask every potential hires the same questions based upon the specific job one is applying for at that time. 3. Recruitment involves the hiring of good people without any discrimination. Training and development is the various types of training of each employee to make them the best employee possible for the job they are performing, Performance evaluations 1. Employees should be reviewed in a very objective manner with the intent of helping the individual grow within the organization and informing them regarding how they can improve. a. Behavior oriented examines the work the employee has performed. b. Goal oriented measures how well the employee has achieved their goals. c. Trait oriented tends to reward what the supervisors think of the employee. Employee oriented focuses on who did the job. 2. Toe of appraisals Management by Objectives relates to helping the employee develop goals to achieve and helping them achieve their objectives. b. Behavior anchored rating - scales analyzes and ranks the performance of each areas of the job. c. Comparative rankings with other employees. d, Narratives would include written evaluations with specifics for each employee. Outsourcing — some companies decide to outsource some services such as internal audit for the following benefits:‘8. Which ofthe folowing elements ofan organization requires people o be accountable fo superiors? A. Contdinaton of effort. B._ Division ofabor. C. Common goa! or puposs. 1. Hierarchy of author. 10, A claimed advantage of decentraizing is. A. Concentration of authority. B. Manager development. CC. Elimination of duplication af effort. D. Elimination of nessential operations. 111, Which ofthe following is @ beneft of docentratzation? A. Thenead of the company is aware of and can influence all decisions before they are made. B, The company s operated as one unit C. Speciais for a particular product have se atnory but advise te company’s op management . Daxisons are made on @ mare timely bas 42, A manager discovers by chance that a newly hired employee has strong beliefs that are ve different from the managers and from those of most Of the other employees, The manager's best course of ‘ction would be to ‘A. Faciitate the reassignment of the new hire {8 quickly as possible before this situation becomes disruptive. B. Ask the rest ofthe team for thelr reaction and ‘act according to the group consensus. C. Take no action untess the new hire's behavior fs Tkaly to cause harm to the organization. D. Try to counsel the new hire into more reasonable beliefs, 13. Performance appraisal systems might use any of trae aifferent approacties: (1) who di the Job, 2) how he cb was done, 0 (3) what was ished, Which approach is used by a system {hat places the focus on how the job was done? Behavior-ariented, Goal-oriented, Tralt-orented, Employee-criented. pope 31 14, When faced with the problem of filing a newly created or recently vacated executive positon, ‘organizations must decide whether to promote from ‘within or hire an outsider. One of the disadvantages of promoting from within is that ‘A. Internal promotions can have a negative ‘motivational effect on the employees of the firm, ‘8. Internal promotions are more expensive to the ‘organization than hiring an outsider. . tis diftcut to identity proven performers ‘among internal candidates. D. Hiring an insider teads to the possiblity of social inbreeding within the frm. 18, Evaluating performance is net done to A. Determine the amount of nondiscriminatory benefits that each employee deserves. B. Assoss the avaiable human resources of the ©. Motivate the employees. D. Determine which employees deserve salary increases, 16. In some organizations, internal audit functions are outsourced, Management in a large organization should recognize that the extemal auditor may have ‘an advantage, compared with the internal auditor, because of the external auditor's A. Familiy with the organization. ts annual ‘udts provide an in-depth knoviledge of the organization. B. Size. It can hire experienced, knowledgeable, ‘and certiied staff. ©. Size. itis able to offer continuous availabilty of staff unaffected by other provites. D. Structure. It may more easily accommodate ‘engagement requirements in distant locations. 17. An organization must manage ts flows of materials, components, finished goods, services, OF Information through intermediaries to ultimate consumers. These flows may occur across the functions in an organization's Supply chain. Value chain. Ful-function chain, Integrated chain. eS418. A desirod result ofthe sharing of information by all functions and organizations in the supply chain is. Fewer rush orders, Maximization of inventories held by suppliers, manufacturers, and retaliers. Stockouts. Incompatibilty of the information systems of the panies. 419, The airlines have been leaders in the use of nology. Customers can make reservations either ‘with an aitine or through a travel agency. In this ‘Stuation, a travel agency is classified as which type of distibution channef? gooPr ‘An intermediary. A jobber. A distributor. ‘A facittating agent. 20. Which ofthe following Is not a component of physical distrbution? A B c. D. ‘Transportation. Pricing Location of retail outlets . Warehousing. 24, na well-designed internal contrl system, the ‘same employee may be permitted to A ‘Mail signed checks and aiso cancel supporting documents. Prepare recsiving reports and also approve purchase orders. ‘Approve vouchers for payment and also have ‘access to unused purchase orders. ‘Mail signed checks and also prepare bank fiations.. 22. Which ofthe following intemal control activtios js not usually performed in the vouchers payable department? A 8. Matching the vendor's invoice with the related receiving report. ‘Approving vouchers for payment by having an authorized employee sign the vouchors. Indicating the asset and expense accounts to bo debited ‘Accounting for unused prenumbered purchase orders and receving reports. 32 23, During the aucit of a construction contract, it ‘was discovered that the contractor was being paid {or each ton of dirt removed. The contract called {or payment based on cubic yards removed. Which {internal control might have prevented this error? ‘A. Comparison of invoices with purchase orders or contracts. B. Comparison of invoices with receiving reports. . Comparison of actual costs with budgeted costs, 0. Extension checks of invoice amounts.Study Unit 3 Leadership, Organizational Structure, and Business Processes Answers 13. 14. 15. 16. 17. 18. 19. 20. 21 DONAARWN> 10. PUrU>rPDOLOY 23. eunmD0D0D000DNDD 12. 33Proj A. Study Unit 4 Project Management and Contracts ject Management - Concepts ‘A project is defined as a sequence of activities with the goal of producing a desired result. 1. Aproject should be documented in a business case with strategic goals, investments, and criteria for evaluation. 2. Stakeholders in a project include individuals, groups, sponsors, and participants who are affected by the project. The project life cycle represents the phases of the project towards completion. There are several steps. 1. Control points 2. The charter is the formal authority by the initiator and involves: a. Beginning or initiating the project. b. Planning the project — tailored to each specific project. c. Defining the activities. d. The scope of the work. 3. Business documents represent the benefits plan for management. Project management knowledge areas represent the processes needed for any project to be completed timely. Integration Scope Scheduling Cost Quality Resources Communications Risk . Procurement 10. Stakeholder processes Project management process groups needed to achieve the objectives of the project. 1. Initiating - defines the project by obtaining authorization. The charter is developed at this stage. 2. Planning — defines the scope, goals, and actions to achieve the project objectives. 3. _ Executing — the planned work in agreement with the project requirements which includes resources, activities, and stakeholders engagement. At this stage, changes can take place in the plan. 4. Monitoring and controlling — tracks, reviews, and regulates the progress of the project. 5. Closing — terminates the project when work is completed Project life cycle is the set of phases of a project with control points, the charter, business documents, and criteria for terminating a project if necessary. CONOARONS 34Il. Project Management Techniques A. Graphs and Charts 4 Gantt chart a. Advantage ~ it is simple to implement in planning. It ‘separates each task in a project and graphs it horizontally on a chart with time lines. b. Disadvantage — does not examines the interrelationships of each task. How, ‘Tine (works) yo —— B. _ PERT (Program Evaluation and Review Technique) or CPM (Critical Path Method) — more complex than Gantt chart but measures the critical Path of the workflow. The critical path is the longest path through the workflow and any delay in the critical path will delay the completion of the project. Or one can define the critical path as the shortest amount of time it takes to complete the project. The CPM method adds to the projected time the cost of each task as well. Pat ‘Slack time — the time that a path not on the critical path can be delayed without delaying completion of the project. 2 Crashing - the time to complete an activity assuming all available resources were devoted to the task that is behind time. Itis necessary whenever one is behind on the critical path. 3. Sample diagram with four paths as listed below the chart assuming the time period is in weeks: 1416 vnu> a. Paths Tis 12-48 44649 4-258 44+5+8 = 17 weeks 1-2-5-7-8 4+5+5+4 = 18 weeks 1-3-6-7-8 3+742+4 = 16 weeks 35mM. Change Management ‘A basic principle in management is that individuals hate change. Itis the responsibility of management to help employees get through the Inge process. There are at least three types of change. B. Structural change — a major change in the organizational alignment of the entity. 2. Cultural change — how people work together in the face of change within the company. Product change — a change in the current product mix. c. People will always resist change primarily from fear, lack of control, the unknown, etc. Employees will resist change even if the change will benefit the employees. 1. Onway to cope with change is co-optation which allows some participation by employees but without any meaningful input. Contracts A. Contracts are vital in business because they allow parties to the contract to feel comfortable that the agreement is enforceable to all parties to the contract by law. B Contracts require: An offer and acceptance. a. Anoffer must be definite and certain. 2. Mutual assent (a meeting of the minds). 3. Consideration — past consideration does not count. a. What is given to make a promise enforceable and most come from both parties? The consideration must be legally sufficient to show intent to negotiate. 4. Legality — a legal purpose; one cannot enter into a contract to violate any laws. 5. Capacity of the parties involved — the mental ability to enter into a contract. ee of Contracts Express or implied contracts 1. Express contracts are stated either orally or in writing. 2. Implied contracts are inferred based upon one's conduct but is not in writing. B. Unilateral or bilateral contracts 1. Unilateral — only one party makes a promise to another 2. Bilateral — both sides make an agreement. c. Executory and executed contracts Executory contract is one that has not been completed and there are still steps to be completed within the contract. 2. Executed contract means the contract has been performed in all steps.Study Unit 4 Project Management and Contracts Questions 41. projectis an undertaking with a specific 6. The project management plan Reaining an end uti may have along corto. Project ‘A. Istallored to the specific project. A. Maybe pattof a phase consisting ofrolted Includes project documents. projects C. Includes business documents internal to the B. May contain multiple programs and related Project. activities. C. Should be documented in a business case. D. Has dotverablos that include a benefits ‘management plan. 2 Is an output ofthe project. 7. Tha projet fe cycle i te St of phases of | Fein 2, Stakeholders of a project most likely include ‘A. Costs of changes decrease as the project Soret args ee ae ae Se on C. Parties as diverse as full sponsors and survey ose 28 deliverables are accopted, es eonhiveeinecrae tier D. Such intemal individuals and entities as he eae pean, Sesleri ec cena 2.8 et ata eet A. Shows te ciel pat for @ project. foie Caesars ae tegeuai een ana lo grey ee eae ©. Bese ean show ere po ce iz 9. When making a cost-time tradeoff in CPM analysis, 4. Which of the folowing is a project management Fe stacy that should be crashed isthe activity symanese ‘A. With the largest amount of slack. Aceon Sint B. With the lowest unit crash cost. : ad ©. On the ofitical path with the maximurn possible C. Estimating costs. time reduction. D. Identifying stakeholders, 1D. On the critical path with the lowest unit crash cost. 5, Which of the following is a project management fowedge arse 10. A shotetroute algrtm is used in network rmodet Monitoring and controling processes. . ae on A. Identify bottlenecks in a network and identify B. Organizational process assets. teotgest path Prete Soot: 8. Minimize total travel time from one site to each 1D. Integration processes. of the other sites in a transportation system, CC. Maximize throughput in networks with distinct 37 entry (source node) and ext (sink node) points. . Identity the sot of connecting branches having ‘the shortest combined iengfh,11, ina ctical path analysis, if slack tine in an activity exists, the activity A. Is notessential to the overall project B. Is abackup activty to replace a main activity should it fai . Could be delayed without delaying the overall Project. D. Involves essentialy no time to complete. 12. An organization's management perceives the ‘need to make significant changes. Which of the following factors is management least likely to be able to change? “The organization's members. ‘The organization's structure. ‘The organization’s environment ‘The organization's technology. pomp 13. Co-optation is a ‘A. Method of coping with employee resistance. 8. Cause of resistance to change. CC. Model for categorizing organizational changes. D. Way of allowing meaningful input by resistant ‘employees. ‘14. Organizational change must be considered in the light of potential employee resistance. Resistance A ‘ven though employees wil benef tanihe crane. B. Willbe greatest when informal groups are weakest CC. Witlbe insignificant if no economic loss by ‘employees Is expected. D. 1s centered mostly on perceived threats to Psychological needs. 48. Carol dictatod an offer she inerdodto make to Deanna, vn. hr secolar, crafted an emal basod tn Car's dciaton. burg ionch and before re Ofer fageon sont rn sow arr ag tsb TEDeanna promptly sent an acceptance fo Cara. that was bo ofa ofthe ated acceptance? ‘A. No contract was formed because the offer was. ‘not communicated to the offeree. B. No contract was formed because the offer was not communicated to the offeree by the means ‘chosen by the offeror. C. A contract was formed because Irvin was Carats agent. D. A contract was formed because Carol intended to make an offer and Deanna leamed of the offer in time to make a valid acceptance. 38 16. Gudrun owned a 2.000-2cre country estate. She signed a written agreement with Johann, seling the house on the property and “a sufficient amount of land surrounding the house to create a park.” The. ‘rice was stated to be US $200,000, When Gudrun fused to honor the agreement, Johann sued. Who wil prevail and why? ‘A. Gudrun wilt win because the agreements not reasonably definite. 8. Johann will win because the quantity of land fs implied. C. Johann will win because the parties intended to make a contract. ‘D. Gudrun will win because no financing term was ‘cluded in the agreement, 17. Egan, a minor, purchased Baker's used computer for Egan's personal use. Egan paid US $200 down ‘on delivery and was to pay US $200 thirty days later. Twenty days later, the computer was damaged seriously as a result of Egan's negligence. Five days. after the damage occurred and { day after Egan reached the age of majority, Egan attempted to disaffi the contract with Baker, Egan will ‘A. Be able to disafirm even though Egan was not ‘a minor at the time of disaffirmance, 8. Be able to cisaffim only f Egan does so in writing C._ Not be able to dsaffinm because Egan had failed to pay the balance of the purchase price. D. Notoe able to dati because the ‘computer was damaged 3 a resut of Egan's negligence. 48. In determining whether the consideration requirement to form a contract has been satisfied, the consideration exchanged by the paties to the contract must be A. Of approximately equal vale. Legally sufcont. Exchanged simultaneously by the parties. Fair and reasonable under the circumstances, poe 419, When a client accepts the services of an ‘accountant without an agreement concerning payment, the resul is, A. Animplied-infact contract. B. Animpled: C. An express contract. D. No contract.20, Which of the following represents the basic {distinction betwee a bilateral contract and @ ‘nitateral contract? A B. c. Speofic performance is available f the contract is unilateral but not if iis bilateral, Only one promise is involved if the contract is Unilateral, but two are involved It is bilateral The statute of frauds applies to a bilateral contact but nol io unilateral contract. . Rights under a bilateral contract are assignable, whereas rights under a unilateral ‘contact are not assignable. 39Study Unit 4 Project Management and Contracts Answers 11. 12. 13. 15. 16. 17. NOgbhona 19. 20. DOODUYFOUFOO DPrarrarroad Oo BesStudy Unit 5 Workstations, Databases, and Applications Workstations and Database Systems Workstation — a combination of input, output, and hardware that is used at work. B. Binary storage — data is compiled in such a manner as to be useful. The a ‘structure is as follows: Bit is either a 0 or 1. Itis the lowest level of data. z Byte is a grouping of bits with some characteristic such as a question mark or a letter of the alphabet. 3. Field is a grouping of bytes containing a data element such as a person's name. 4. Record is a group of related fields such as characteristics of an individual. 5. File is a grouping of records with the same related information such as name, address, phone number, email address, etc. There is usually only one key to a file in a master file. One would use the simplest number to open that file such as their account number. C. Electronic Data Interchange (EDI) allows communication of documents that are electronically transferred from one company to another such as. purchase orders. Encryption of data is critical. D. —_ Electronic Funds Transfer (EFT) allows one to transfer funds from one's financial institution worldwide to another party. —. Governance, Risk, and Compliance (GRC) Systems comprises both IT systems and technology to aid an organization in the accomplishment of its strategies based upon business needs. There are three types of strategies one can develop. 1. Corporate-level strategy — focuses on business markets and resources as an example. 2. Business-level strategies — used when a company has independent business sectors which develop their own operational strategy. 3. Functional-level strategies — examines certain functions such as. IT, marketing, human resources, etc. 4 There are strategic drivers that aid in determining whether one is ‘successful or failing in the strategy such as customer relationships cor the opportunities for IT to provide a strategic advantage. F. Information systems (IS) strategy relative to what one needs from an IT ‘system is based on business needs instead of the function of the system when putting a plan together. A database system should be used if it meets one’s needs. It should utilize the mission statement to meet the overall needs of the organization. G. Items in the database. There is separation of logical and physical items in the database. 1. Advantages ~ avoid redundancy and inconsistencies in data. 42. Disadvantages — high initial investment, maintenance, error contamination, and access controls. Data Structure 1. Can be physical or logical. Physical shows where things are physically located. Logical show how the information is viewed from the user's perspective. There are keys and pointers. Structural Modele Flat files mean all the records and all data elements within each record follow behind each other in order. 2. Hierarchical — data elements are organized into an inverted tree structure based upon ownership of data. 3. Network — data elements can have several owners in addition to ‘owning other elements. 4. Relational — data is perceived to be structured in the form of a simple table consisting of keys (open the door) and associated fields. a Normalization - organization of data into a simple, logical form. There are anomalies as side effects that can be reduced by simplifying the relationships between data elements. b. Three relationships in relational models are: (1) Selecting — a subset of records with a determined riteria (2) Joining — combining relational tables based upon a common denominator. (3) Projecting — operation creates a new table with only certain predetermined elements from the original tables. ¢. Deadly embrace — simultaneous access to transactions can lock a data element so that the other party that needs the same data is locked out. The system needs an algorithm to undo the problem when it occurs. Database Management System — one in which the programs work independent of the physical or logical structure of the data. Data schema — a description of the logical structure or organization of the database. It describes data elements, their relationships, and organization of data. The view is the organization and relationship of data. 2. Dictionary - a file that describes the use of data. It is a mapping of data. It lists all data items and their definitions and can indicate what programs use the data, which files contain the data, and which reports display the data. 3. Database administrator (DBA) is the individual who has overall responsibility for developing and maintaining the database and for establishing controls to protect its integrity. 2‘Application Develo ‘The systems development life cycle has § steps: ‘Systems strategy — what do we need? Project initiation — providing people with information about the project and assessing possible proposals. In-house development - used when one has a unique data need. Commercial packages — purchased for routine needs. Maintenance and support - needed when changes must be made. Steps in the process Feasibility and planning.- cost benefit and availability of technology. Requirement analysis — where we are and what we need. ‘System design — systems analyst. Building and development — programmers. Training and control of quality. ‘Acceptance, installation and implementation. Operations and maintenance — monitoring to see how it works and making necessary adjustments. Other basic needs when change is necessary. 1. Managing changes to the system without losing control. 2. Making sure the preventive and detective controls are in place whenever software is changed since there is great risk that changes could be wrong or fraudulent, iat Computing (EUC) These involve user-created or user-acquired systems that are maintained and operated outside of traditional information system controls. Things such as development, documentation, and maintenance are also outside the system. The user is responsible for the physical security of the computer. 2. Abig risk is that application programs may be difficult to integrate with other system data. Computer-aided software engineering (CASE) is used to aid in the software design and development. It uses previously created applications to the new system to ensure data integrity rules for validation and access. 1, Rapid application development (RAD) is a software process involving development, construction of prototypes, and the use of CASE tools. 2, Prototyping is an altemative approach to application development that involves creating a working model of the new system to demonstrate for the user. Conversion can be either: 1. Parallel - run the old program and the new program at the same time in case of to assure the new program works properly. 2. Direct cut-over to the new system. Internal audit role is to help in identifying control risks, proper responses to risk, and auditing the system to make sure it is operating as designed. NOMPONSD MAY NO 4BStudy Unit 5 Workstations, Databases, and Applications Questions 1.Of the folowing, the greatost advantage of a database (server) architecture is. A B ©, o. Data redundancy can be reduced. Conversion to a database system is inexpensive and can be accomplished quickly Multiple occurrences of data items are useful for consistency checking. Backup anc recovery procedures are minimized. 2. Afile-oriented approach to data storage requires 2 primary record key for each fle. Which of the following is a primary record key? A 8 c, B, ‘The vondor number in an accounts payable master fle, ‘The vendor number in a closed purchase order transaction fle, “The vendor number in an open purchase order master fie Al ofthe answers are correct. 3.In a database system, locking of data helo Preserve data integrity by permitting transactions fo nave control ofa tre data needed to compioto the transactions. However, implementing a locking procedure could lead to A 8 ©. . Inconsistent processing, Rollback failures. Unrecoverable transactions. Deadly embraces (retrieval contention). 4. Which of the following should not be the responsibilty of a database administrator? A a ©. Design the content and organization ofthe database. oo Develop applications to access the database. Protect the database and its sofware. Monitor and improve the effcincy ofthe database. a 5. Which ofthe following is a primary function of a database management system (DBMS)? Report customization, Capatilty to create and modify the database. Financial transactions input. Database access authorizations pomp 6. Inan inventory system on a database management ‘system (DBMS), one stored record contains part number, part name, part coler, and part weight. These individual items are called A. Fields, B. Stored fies. ©. Bytes, D. Occurrences. 7. Information systems (IS) strategy is determined by A. Business needs, B. Individual department needs. ._ The technology available. D. Compottors' strategies. £8 Which ofthe following is (are) a type(s) of business strategy('es)? A. Corporate-tevel strategy. B. Business-level strategy. ©. Functional-ievel strategy. D. Allare types of strategies.9. Allof he following are true statements about mmission and vision statements except A. The vision statemant defines in a few sentences the organization's main purpose. 8. The mission statement expands on the vision, slatement by communicating organization's goals. C. AnIS strategic plan incorporates the ‘organization's vision and mission to ensure the strategy employed matches ihe needs of a single department D. The goals outined in the mission statement should provide guidance for the IT infrastructure to create a detailed strategic plan, 10. Which ofthe folowing is rue about strategic drivers that help determine the outcome af an organization's strategy? 1. New technologies create opportunitias for improvement and compettive advantage. 2. Customer relationship management (CRM) is. 2 term that refers to practices, strategies, and technologies that companies use to manage and analyze customer interactions and dala throughout the customer tecyelo 3. Information systems ('S) has becoms a strategic driver in most, if not all, organizations. ‘only. 2only, Sony. 1,2, and 3 pope 11. All ofthe following are correct statoments regarding business information systoms (IS) strategy and business information technovogy (IT) excopt ‘A. Business IT strategy is focused on determining what technology and technological s development are needed to accomplish the business IS strategy B. Business IS strategy is focused on determining What IS must be provided to accomplish the Goals of the business strategy. ©. Business IT strategy concentrates on how to provide the information. D. Business IT strategy is focused on developing and expiaining the information architecture that will provide the best return for the organization. 45 412. Which ofthe following outcomes is 2 likely benefit Of information technology used for internal control? ‘A. Processing of unusual or nonrecurring transactions, 8. Enhanced timeliness af information. C. Potential loss of data, D._ Recording of unauthorized transactions, 13. Governance, risk, and compliance (GRC) systems are representative of all ofthe following statements. except ‘A. GRC systems enabie organizations to implement governance programs. B. GRC systems concentrate on an individual function within an organization, ©. GRC systems assist with compliance with government requirements. D. GRC systems have the potential of identtying ‘and lowering costs. +14. Which ofthe following statements is not indicative ‘of govemance, risk, and compliance (GRC) systems? ‘A. GRC systems are associated with monitoring contro, B._ Federal and local government rules are considered when implementing GRC systems, C. GRC systems are not tasked with identifying the source of risks. . GRC systems enabie organizations to manage the governance program strategy. 15. An insurance frm that follows the systems. development life cycle concept forall major information system projects is preparing to start a feasibility study for a proposed underwriting system. ‘Some of the primary factors the feasibility Study Should include are ‘A. Possitie vendors forthe system and their reputation for quality B. Exposure to computer viruses and other intrusions. CC. Methods of implementation, such as parallel or cutover. D. Technology and related costs,16. Responsibility for the control of end-user computing (EUC) exists al the organizational, Sepanmental, and Individual user level. Which of the following should be a direct responsibilty of the Individual users? ‘A. Acquisition of hardware and software, B. Taking equipment inventories, ._ Strategic planning of end-user computing. D. Physical secunty of equipment. 117. Which ofthe following risks is more likely to be encountered in an end-user computing (EUC) environment as compared with a centralized environment? A. Inabilly to afford adequate uninteruptibie ower supply systems. B. User input screens without a graphical user interface (GUD. C. Applications that are diffcult to integrate with ‘thar information systems. D. Lack of adequate utlity programs. 418, Two phages a systams panning ae project definition and project initiation. All ofthe following are stops in the project ination phase except A. Preparing the project proposal B._ Informing managers and emproyees of the project. C. Assembling the project team. D. Training selected personnel 49. The process of feaming how the current system unctions, determining the needs of users, and developing the logical requirements of a proposed systems referred to as ‘Systems maintenance, ‘systems analysis. Systems feasibilty study. Systeme design. pom 20. The process of monitoring, evaluating, and ‘modifying a system as needed is referred to as ‘A. Systoms analysis. 8. Systems feasibility study, ©. Systems maintenance. D. Systems implementation. 21. A benefit of using computer-aided software ‘engineering (CASE) technology is that itcan ensure that No obsolete data flelds occur in fles. Users become committed to new systems, All programs are optimized for efficiency. Data integrity rules are applied consistently. poopStudy Unit 5 Workstations, Databases, and Applications Answers: 2 ZeOSngnawna no DOOUYYODOYY a vowrouc00nD 47Study Unit 6 IT Infrastructure 1. Functional Areas of IT Operations A. Organizational Controls — Just as segregation of duties is a vital part of internal controls in a manual system, they are equally as important in an IT environment. The folowing functors should be segregated: Database Administrator (DBA) is the individual who has overall responsibility for developing and maintaining the database and for establishing controls to protect its integrity. 2. Systems analyst — designs and evaluates new and old systems and prepares system specifications for programmers. They might flowchart the system they have designed. They are the architects of the system. 3. Programmers — write the programs based on analyst's designs, document programs, debugs new and existing programs. 4, Webmaster is responsible for the content of the company's website. 5. Operators - are responsible for processing data. They may also have responsibility for the input of data. 6. Help desks — these individuals log problems, resolve minor problems, and send difficult problem to the appropriate individual. Help desks are under the area of computer operations and they interface with users. 7. Network technicians maintain the devices that work with the system. 8. _ End users must be able to change production data but not programs. Web Infrastructure The internet connects all networks around the world and makes it inexpensive for communication, transferring information, and is extremely fast. There are three main aspects of the intermet. 1. Servers that store information. 2. Individuals who view the internet. 3. Transmission Control Protocol (TCP) that allows one to connect to another site 4, Also, there are gateways that allow individual computers to communicate with mainframe computers to gain information. B. Mainframes were used early in technology for large amounts of data storage. ‘System decentralization — changes in technology now allow for distributed processing of information Servers represent dedicated computers that handle specific resources. The risk, however, is that a file can be changed without approval. 48E. Languages and protocols used with the internet ~ over the years the access to the internet has changed a great deal due to the language used. 1. Hypertext Markup Language (HTML) is very popular because it can be read by many different applications and on different operating systems. It is used for web page design and is both hardware and software independent. Extendable Markup Language (EML) allows the user to determine how information should be presented and what the information relates to. Extensible Business Reporting Language (XBRL) if used for financial statements so commercial industries can gain access to financial data. Il, IT System Communications and Software Licensing A Syeteme 3, 4. Operating system consists of a set of programs which have the operating system, drivers for interfacing with peripheral devices, utility programs for sorting and merging files and program language translators. a. Mainframes. b. Server operating systems would be UNIX, Windows, and Apple MacOS. c. Desktop computers. Utility programs assist in such functions as sorting and merging files can be used in a specialized form to delete files permanently from storage. Databases are areas of storage where data elements are linked to related fields. Access to any system should be by passwords. B. Networks — There are many different ways that a company might connect users of information together. 1. 2. 3 Network — multiple connected computers at multiple locations. Protocol - is a set of standards relate to how we communicate among devices in a network. Local area network (LAN) — distributes shared information in a single location or office building. It uses a dedicated server to store programs and files, interface card to link computers to printers, a gateway as a means of connecting one network to another, and Ethernet which allows products from various vendors to talk to each other. Metropolitan area network (MAN) — connects devices across an urban area. Wide area network (WAN) ~ sharing of data over a geographically dispersed area. Uses dedicated lines, microwave transmission, and satellite communications. a. Publicly owned — telephone companies and Intemet. 9