Part One: Multiple Choice
Chapter 1:
3. Which of the following is a primary activity in the value chain?
a. purchasing b. accounting c. post-sales service d. human resource management

6. In the value chain concept, upgrading IT is considered what kind of activity?
a. primary activity b. support activity c. service activity d. structured activity

9. A firm, its suppliers, and its customers collectively form which of the following?
a. supply chain b. value chain c. ERP system d. AIS

Chapter 2:
3. Which of the following would contain the total value of all inventory owned by an organization?
a. source document b. general ledger c. cash budget

4. Which of the following is most likely to be a general ledger control account?
a. accounts receivable b. petty cash c. prepaid rent d. retained

Chapter 12:
8. Which of the following provides a means both to improve the efficiency of processing customer payments and also to enhance control over those payments? a. CRM b. lockboxes c. aging accounts receivable d. EDI

9. For good internal control, who should approve credit memos?
a. credit manager b. sales manager c. billing manager d. controller

10. For good internal control over customer remittances, the mailroom clerk should separate the checks from the remittance advices and send the customer payments to which department?
a. billing b. accounts receivable c. cashier d. sales

Chapter 13:
1. Which of the following inventory control methods is most likely to be used for a product for which sales can be reliably forecast?
a. JIT b. EOQ c. MRP d. ABC

3. Which of the following is true?
a. It is easier to verify the accuracy of invoices for purchases of services than invoices for purchases of raw materials.
b. Setting up petty cash as an imprest fund violates segregation of duties.
c. The EOQ formula is used to identify when to reorder inventory.
d. A voucher package usually includes a debit memo.
4. Which document is used to establish a contract for the purchase of goods or services from a supplier?
a. vendor invoice b. purchase requisition c. purchase order d. disbursement voucher

5. Which method would provide the greatest efficiency improvements for the purchase of noninventory items such as miscellaneous office supplies?
a. bar-coding b. EDI c. procurement cards d. EFT

7. What is the best control procedure to prevent paying the same invoice twice?
a. Segregate check-preparation and check-signing functions.
b. Prepare checks only for invoices that have been matched to receiving reports and purchase orders.
c. Require two signatures on all checks above a certain limit.
d. Cancel all supporting documents when the check is signed.

8. For good internal control, who should sign checks?
a. cashier b. accounts payable c. purchasing agent d. controller

9. Which of the following procedures is designed to prevent the purchasing agent from receiving kickbacks?
a. maintaining a list of approved suppliers and requiring all purchases to be made from suppliers on that list
b. requiring purchasing agents to disclose any financial investments in potential suppliers
c. requiring approval of all purchase orders
d. prenumbering and periodically accounting for all purchase orders

10. Which document is used to record adjustments to accounts payable based on the return of unacceptable inventory to the supplier?
a. receiving report b. credit memo c. debit memo d. purchase order

Part Two: Matching
1.8. Classify each of the following items as belonging in the revenue, expenditure, human resources/payroll, production, or financing cycle.
a. Purchase raw materials (expenditure)
b. Pay off mortgage on a factory (financing)
c. Hire a new assistant controller (human resources/payroll)
d. Establish a $10,000 credit limit for a new customer (revenue)
e. Pay for raw materials (expenditure)
f. Disburse payroll checks to factory workers (human resources/payroll)
g. Record goods received from a vendor (expenditure)
h. Update the allowance for doubtful accounts (revenue)
i. Decide how many units to make next month (production)
j. Complete a picking ticket for a customer order (revenue)
k. Record factory employee timecards (human resources/payroll)
l. Sell concert tickets (revenue)
m. Draw on line of credit (financing)
n. Send new employees to a business ethics course (human resources/payroll)
o. Pay utility bills (expenditure)
p. Pay property taxes on an office building (expenditure)
q. Pay federal payroll taxes (human resources/payroll)
r. Sell a DVD player (revenue)
s. Collect payments on customer accounts (revenue)
t. Obtain a bank loan (financing)
u. Pay sales commissions (human resources/payroll)
v. Send an order to a vendor (expenditure)
w. Put purchased goods into the warehouse (expenditure)

2.5. Match the following terms with their definitions.
a. data processing cycle: 10. The steps a company must follow to efficiently and effectively process data about its transactions
b. source documents: 23. Initial record of a transaction that takes place; usually recorded on preprinted forms or formatted screens
c. turnaround documents: 7. Company data sent to an external party and then returned to the system as input
e. general ledger: 1. Contains summary-level data for every asset, liability, equity, revenue, and expense account
f. subsidiary ledger: 13. Contains detailed data for any general ledger account with many individual subaccounts
g. control account: 26. The general ledger account corresponding to a subsidiary ledger, where the sum of all subsidiary ledger entries should equal the amount in the general ledger account
h. coding: 21. Systematic assignment of numbers or letters to items to classify and organize them
m. chart of accounts: 4. List of general ledger account numbers; allows transaction data to be coded, classified, and entered into proper accounts; facilitates preparation of financial statements and reports
n. general journal: 8. Used to record infrequent or nonroutine transactions
o. specialized journal: 17. Used to record large numbers of repetitive transactions
p. audit trail: 3. Path of a transaction through a data processing system from point of origin to final output, or backward from final output to point of origin
r. attribute: 9. Characteristics of interest that need to be stored
s. field: 6. Portion of a data record that contains the data value for a particular attribute, like a cell in a spreadsheet
t. record: 24. Fields containing data about entity attributes; like a row in a spreadsheet
v. master file: 12. Stores cumulative information about an organization; like a ledger in a manual AIS
w. transaction file: 14. Contains records of individual business transactions that occur during a specific time period
x. database: 18. Set of interrelated, centrally coordinated files
y. batch processing: 20. Updating done periodically, such as daily
z. online, real-time processing: 15. Updating each transaction as it occurs

2.6. For each of the following scenarios, identify which data processing method (batch or online, real-time) would be the most appropriate.
a. Make an airline reservation (online, real-time)
b. Register for a university course (online, real-time)
c. Prepare biweekly payroll checks (batch)
d. Process an order through an e-commerce website (online, real-time)
e. Prepare a daily bank deposit (batch)
f. Preparation of customer bills by a local utility (batch)
g. Accumulate daily costs from a production run of a single automobile part (batch)
h. Identify the replacement drill bit size for a bit broken during a recent production run (online, real-time)

2.8. Which of the following actions update a master file and which would be stored as a record in a transaction file?
a. Update customer address change (master file)
b. Update unit pricing information (master file)
c. Record daily sales (transaction file)
d. Record payroll checks (transaction file)
e. Change employee pay rates (master file)
f. Record production variances (transaction file)
g. Record sales commissions (transaction file)
h. Change employee office location (master file)
i. Update accounts payable balance (master file)
j. Change customer credit limit (master file)
k. Change vendor payment discount terms (master file)
l. Record purchases (transaction file)

12.1. Match the term in the left column with its definition in the right column.
1. CRM system: d. System that contains customer-related data organized in a manner to facilitate customer service, sales, and retention
2. Open-invoice method: g. Method of maintaining customer accounts that generates payments for each individual sales transaction
5. Cycle billing: b. Process of dividing customer account master file into subsets and preparing invoices for one subset at a time
6. FEDI: c. System that integrates EFT and EDI information
7. Remittance advice: n. Turnaround document returned by customers with payments

12.11. Match the threats in the first column to the appropriate control procedures in the Second column (more than one control may address the same threat).
3. Crediting customer payments to the wrong account: o. Mailing of monthly statements to customers
6. Excess inventory: l. Use of either EOQ, MRP, or JIT inventory control system
7. Reduced prices for sales to friends: a. Restricted access to master data
8. Orders later repudiated by customers who deny placing them: d. Digital signatures
10. Errors in customer invoices: h. Reconciliation of invoices with packing lists and sales orders

13.2. Match the terms in the left column with their appropriate definition in the right column.
2. Materials requirements planning (MRP): f. An inventory control system that triggers production based on forecasted sales
3. Just-in-time (JIT) inventory system: e. An inventory control system that triggers production based upon actual sales
10. Evaluated receipts settlement (ERS): h. A process for approving supplier invoices based on a two-way match of the receiving report and purchase order
13. Debit memo: d. A document used to authorize a reduction in accounts payable because merchandise has been returned to a supplier
14. Vendor-managed inventory: o. A system whereby suppliers are granted access to point-of-sale (POS) and inventory data in order to automatically replenish inventory levels

13.4. Match the threats in the left column to appropriate control procedures in the right column. More than one control may be applicable.
2. Recording and posting errors in accounts payable: f. Conduct an automated comparison of total change in cash to total changes in accounts payable.
3. Paying for items not received: l. Issue checks only for complete voucher packages (receiving report, supplier invoice, and purchase order).
11. Wasted time and cost of returning unordered merchandise to suppliers: a. Accept only deliveries for which an approved purchase order exists.
12. Accidental loss of purchasing data: n. Carry out a regular backup of expenditure cycle database.
13. Disclosure of sensitive supplier information (e.g., banking data): j. Restrict access to the supplier master data.

9. Match the computer fraud and abuse technique in the left column to the proper description in the right column (the matching below is correct) Botnet and Bot Herders | A network of hijacked computers, called zombies, used in a variety of Internet attacks. | Malware | Software that can be used to do harm. | Spyware | Software that monitors computing habits and sends that data to someone else, often without the user's permission. | Trojan Horse | Unauthorized code in an authorized and properly functioning program. | Man-in-the-Middle (MITM) Attack | A hacker placing himself between a client and a host to intercept network traffic. | Virus | Executable code that attaches itself to software, replicates itself, and spreads to other systems or files. Used to make unauthorized alterations. | Cyber Extortion | Requiring a company to pay money to keep an extortionist from harming a computer or person. | Economic Espionage | The thefts of information, trade secrets and intellectual property. | Ransomware | Software that encrypts programs and data untill a ransom is paid to remove it. | Scareware | Malicious software of no benefit that is sold using scare tactics |

Part Three: Table
1. A. List the six components of an AIS:
1. The people who use the system
2. The procedures and instructions used to collect, process, and store data
3. The data about the organization and its business activities
4. The software used to process the data
5. The information technology infrastructure, including the computers, peripheral devices, and network communications devices used in the AIS
6. The internal controls and security measures that safeguard AIS data

1. B. List and explain the six ways an AIS can add value to an organization:
1. Improving the quality and reducing the costs of products or services. For example, an
AIS can monitor machinery so operators are notified immediately when performance falls outside acceptable quality limits. This helps maintain product quality, reduces waste, and lowers costs.
2. Improving efficiency. For example, timely information makes a just-in-time manufacturing approach possible, as it requires constant, accurate, up-to-date information about raw materials inventories and their locations.
3. Sharing knowledge. Sharing knowledge and expertise can improve operations and provide a competitive advantage. For example, CPA firms use their information systems to share best practices and to support communication between offices. Employees can search the corporate database to identify experts to provide assistance for a particular client; thus, a CPA firm’s international expertise can be made available to any local client.
4. Improving the efficiency and effectiveness of its supply chain. For example, allowing customers to directly access inventory and sales order entry systems can reduce sales and marketing costs, thereby increasing customer retention rates.
5. Improving the internal control structure. An AIS with the proper internal control structure can help protect systems from fraud, errors, system failures, and disasters.
6. Improving decision making. Improved decision making is vitally important and is discussed below in more detail.

Revenue Cycle Transaction Processing Worksheet | Require Common Output | Process and Explanation | Required Input | Order Date | Retrieve date from computer | Select prepare packing slip | Order Number | Use a counter | Select prepare packing slip | Item Name | Find the product description in the master file | Enter item number | Price | Find the product price from the master file | Enter item number | Amount | Find the product price from the master file, times the quantity | Enter item number | Shipping Cost/ Sales Tax | Add up amount get from master file | |

Expenditure Cycle Transaction Processing Worksheet | Require Common Output | Process and Explanation | Required Input | Purchase Order Number | Use a counter | Create purchase number | Vendor Number | Print vendor number | Enter vendor number | Vendor Identification | Find the vendor information in the master file | Enter vendor number | Item Number | Print item number | Enter item number | Description and Unit Price | Find the description and unit price from the master file | Enter item number | Buyer Name | Use a login data | Login buyer number |