TEST BANK FOR ACCOUNTING INFORMATION SYSTEMS 2ND

Edition by Richardson Chang and Smith

True / False Questions:

1. Accounting and Finance is a primary activity in the value chain.

Answer: FALSE

2. Accounting Information Systems at this date are all computerized.

Answer: FALSE

3. Business value includes all those items, events and interactions that determine the financial health
and well-being of the firm.

Answer: TRUE

4. The Certified Information Technology Professional (CITP) is a professional designation for those
with a broad range of technology knowledge and does not require a CPA.

Answer: FALSE

5. The Certified Information Systems Auditor (CISA) is a professional designation generally sought by
those performing IT audits.

Answer: TRUE

6. Information is defined as being data organized in a meaningful way that is useful to the user.

Answer: TRUE

7. Data is defined as being information organized in a meaningful way that is useful to the user.

Answer: FALSE

8. A systems analyst analyzes a business problem that might be addressed by an information system
and recommends software or systems to address that problem.

Answer: TRUE

9. A value chain is defined as the flow of materials, information, payments, and services from
customer to supplier.

Answer: FALSE
10. Relevant information is that information that is free from bias and error.

Answer: FALSE

11. The characteristics of relevant information include predictive value, feedback value and
timeliness.

Answer: TRUE

12. The characteristics of reliable information are that the information is verifiable, without bias and
timely.

Answer: FALSE

13. Information overload is defined as the difficulty a person faces in understanding a problem and
making a decision as a consequence of too much information.

Answer: TRUE

14. The main financial benefit of Customer Relationship Management practices reduces the cost of
goods sold.

Answer: FALSE

15. An efficient Enterprise System can significantly lower the cost of support processes included in
sales, general, and administrative expenses.

Answer: TRUE

16. An accounting information system (AIS) is defined as being an information system that records,
processes and reports on transactions to provide financial and nonfinancial information for decision
making and control.

Answer: TRUE

17. An enterprise system is a centralized database that collects data from throughout the firm. This
includes data from orders, customers, sales, inventory and employees.

Answer: TRUE

18. Outbound logistics are the activities associated with receiving and storing raw materials and other
partially completed materials, and distributing those materials to manufacturing when and where
they are needed.

Answer: FALSE
19. Service Activities as defined in the value chain are those activities that provide the support of
customers after the products and services are sold to them (e.g. warranty repairs, parts, instruction
manuals, etc.).

Answer: TRUE

20. A well-designed and well-functioning AIS can be expected to create value by providing relevant
information helpful to management to increase revenues and reduce expenses.

Answer: TRUE

21. Production of a 1040 tax form from the AIS to be delivered to the Internal Revenue Service is an
example of discretionary information.

Answer: FALSE

22. An enterprise system is primarily used to manage and nurture a firm’s interactions with its current
and potential clients.

Answer: FALSE

23. The Sarbanes-Oxley Act of 2002 is a federal law in the United States that set new and enhanced
standards for all U.S. public companies, their management and public accounting firms.

Answer: TRUE

24. CRM software often includes the use of database marketing tools to learn more about the
customers and to develop strong firm-to-customer relationships.

Answer: TRUE

25. The Certified Information Technology Professional is the position created by the AICPA to
recognize CPAs who have the ability to provide skilled professional services on Information
Technology.

Answer: TRUE
MULTIPLE CHOICE QUESTIONS

26. Accounting information systems:

a. Are always computerized.

b. Report only accounting information.

c. Include records, processes and reports.

d. Are for computer games.

27. Which of the following is not a characteristic of useful information?

a. Easy to understand

b. Feedback value

c. Timeliness

d. Representational Faithfulness

28. Which of the following are considered to be mandatory information required by a regulatory
body?

a. Financial reports for the Securities and Exchange Commission

b. The amount of taxes saved by a merger

c. The total dollar value of fireworks that are sold on July 4

d. The cost to build an all-new Starbucks restaurant in Abu Dhabi

29. The correct order of effects in the value chain are:

a. Inbound Logistics Operations Service

b. Inbound Logistics Outbound Logistics

Marketing & Sales

c. Inbound Logistics Operations Outbound Logistics

d. Inbound Logistics Operations Service

a. Certified Internal Auditor (CIA)

b. Certified Public Accountant (CPA)

c. Certified Information Technology Professional (CITP)

d. Certified Information Systems Auditors (CISA)

31. Which designation is for CPAs with a broad range of technology knowledge and experience?

a. Certified Internal Auditor (CIA)

b. Certified Public Accountant (CPA)

c. Certified Information Technology Professional (CITP)

d. Certified Information Systems Auditors (CISA)

AACSB: Reflective Thinking

32. A supply chain:

a. Refers to the supplies needed to build products.

b. Refers to the flow of materials, information, payments and services.

c. Is similar in function and purpose to the value chain.

d. Does not apply to a service firm like an accounting firm.

33. A supply chain system does not include information about:

a. Current customers.

b. Prospective customers.

c. Availability of inventory.

34. The income statement line item most likely affected by an AIS investment in enterprise systems
would be:

a. Revenues.

b. Cost of Goods Sold.

c. Selling, General and Administrative Expenses.

35. The income statement line item most likely affected by an AIS investment in supply chain that
would interface with suppliers would be:

a. Revenues.

b. Cost of Goods Sold.

c. Selling, General and Administrative Expenses.

d. Research and Development Expenses.

36. The IT strategic roles of AIS investments are classified as:

a. Automate, Informate, Transform.

b. Value creation, Value Destruction, Value Neutral.

c. Digitize, Report, Transform.

d. Automate, Digitize, Transport.

37. According to a recent study, the transform IT strategic role is defined as systems that:

a. Replace human labor in automating business processes.

b. Provide information about business activities to all employees.

c. Provide information about business activities to senior management.

d. Fundamentally redefine business processes and relationships.

38. According to a recent study, the informate-up IT strategic role is defined as systems that:

a. Replace human labor in automating business processes.

b. Provide information about business activities to all employees.

c. Provide information about business activities to senior management.

d. Fundamentally redefine business processes and relationships.

39. The income statement account most likely affected by an AIS investment in customer relationship
management (CRM) would be:

a. Revenues.

b. Cost of Goods Sold.

d. Unearned Revenue.

40. Many hospitals and doctor’s offices are beginning to digitize the medical records of their patients.
This is an example of the ____________ strategic role.

a. Automate

b. Informate – up

c. Transform

d. Informate – down

41. EBay uses information technology to sell goods on the internet. This would be an example of the
___________ strategic role.

a. Automate

b. Informate – up

c. Transform

d. Informate – down

42. The Information Value Chain is defined as:

a. The flow of materials, information, payments, and services.

b. The use of computer technology to provide information about business activities to employees across
the firm.

c. The overall transformation of data from a business need to the ultimate decision.

d. A centralized database that collects data from throughout the firm.

43. Business Value is defined as:

a. The monetary value of a business.

b. Items, events and interactions that determine the financial health and well-being of the firm.

c. The cost to acquire a business by an outsider.

d. The overall value of taking data and transforming it in to information needed for decision making.
44. Customer Relationship Management is defined as:

a. A system used to manage and nurture a firm’s interactions with its current and potential customers.

b. A system used to track a customer’s past purchases

c. A system used to connect a firm’s suppliers with a firm’s customers.

d. A system used to advertise current items on sale to customers.

45. Support activities in the value chain do not include:

a. Firm Infrastructure.

b. Human Resource Management.

c. Procurement.

d. Accounting and Finance.

46. The role of accountants in accounting information systems include all except:

a. User.

b. Manager.

c. Operator.

d. Evaluator.

47. A simple information system includes all but the following elements except:

a. Processing.

b. Storage.

c. Input.

d. Reporting.

48. Activity-based costing is an example of:

a. Information overload.

b. Mandatory information.

c. Discretionary information.

d. Enterprise System.
49. An example of an AIS that primarily addresses internal business processes includes:

a. Supply chain software.

b. Customer relationship management software.

c. B2B transaction software.

d. Enterprise systems.

50. Bob’s manager complains that Bob suffers from “Analysis Paralysis;” that is, he spends too much
time reviewing endless reports and is reluctant to make decisions. Bob most likely suffers from
____________.

e. Data gridlock.

f. Discretionary information.

g. Information overload.

h. Data redundancy.

51. Which of the following systems would a company be most likely to employ for the primary
purpose of generating additional sales revenue?

a. MDBMS.

b. CRM.

c. SCM.

d. OCR.

52. The primary transformation of data into information takes place in which of the following
activities?

a. Input.

b. Storage.

c. Processing.

d. Output.
53. Discretionary information is most likely to be used in which of the following activities?

a. Preparing required Environmental Protection Agency emissions reports.

b. Filing a 10-K with the SEC.

c. Management decision-making.

d. Payroll tax reporting.

54. Which of the following is not a primary activity in the Value Chain?

a. Outbound Logistics.

b. Marketing.

c. Inbound Logistics.

d. Information Technology.

55. One of the most important ways that ERPs benefit organizations and their business processes is:

a. Current information is made available to all users involved in the activities and decisions associated
with a company’s business processes.

b. Information is stored in many specialized, distributed databases that each serve separate business
processes.

c. Reducing the amount of time to complete business processes by eliminating all controls associated
with the processes.

d. Preventing external business partners from accessing the organization’s data.

56. One common way of measuring the effectiveness of the Supply Chain is through the fill rate.
Which of the following best describes the fill rate?

a. The percentage, in monetary value, of a supplier’s order which is actually delivered to the
organization.

b. The number of items per hour that receiving employees can move from the receiving dock to the
warehouse.

c. The rate at which the stock in warehouse storage bins increases.

d. The average amount of time it takes for the organization to fulfill customers’ orders.
57. Investors reward companies most that announce IT initiatives with which type of strategic role?

a. Automate.

b. Informate – up.

c. Transform.

d. Informate – down.

58. A dental practice implemented an upgrade to its AIS that provides the dentists with daily and
weekly patient and financial summaries. The practice’s upgrade is an example of which IT strategic
role?

a. Automate.

b. Informate – up.

c. Transform

d. Informate – down.

59. Which of the following most accurately describes IFAC’s description of accounting and IT?

a. IT is an important peripheral discipline to accounting.

b. Accounting and IT are indistinguishable from one another.

c. It is difficult to conceive of accounting independent from IT.

d. Accounting is an important peripheral discipline to IT.

60. Which of the following diagrams most accurately illustrates an information system? Feedback

Design Prototype User.

C.

61. The Sarbanes-Oxley Act of 2002 requires that a company’s attest auditors be able to perform
which of the following activities?

a. Evaluate the internal controls in AIS.

b. Assess the value of a company’s IT assets.

c. Take over the company’s AIS if necessary.

d. Design and implement the controls used in the AIS.

Peace Prize winning organization that provides medical services in war zones and developing
countries.

For this type of organization, which of the following would likely be the best measure of business
value?

a. Fund balance (i.e., the net of revenues less expenditures).

b. Lives saved.

c. Donations raised.

d. Volunteers deployed.

63. Effective use of Supply Chain Management software is generally expected to provide all of the
following benefits except:

a. Reduced inventory carrying costs.

b. Lower production costs.

c. Reduced gross margins.

d. Better communications with suppliers.

64. Which of the following is usually the primary objective for companies when creating mandatory
information?

a. The value of the information exceeds the cost to produce it.

b. Minimize cost.

c. Improve business decisions.

d. Ensure proper controls over business processes.