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University of Illinois - Chicago

ACTG 474 Accounting Information Systems

Chapter 5 Practice Quiz
Fall 2015
Professor: Jastrzebski
1) Why are threats to accounting information systems increasing?
A) Many companies do not realize that data security is crucial to their survival.
B) LANs and client/server systems are easier to control than centralized, mainframe systems.
C) Many companies believe that protecting information is a strategic requirement.
D) Computer control problems are often overestimated and overly emphasized by management.
2) Identify the preventive control below.
A) reconciling the bank statement to the cash control account
B) approving customer credit prior to approving a sales order
C) maintaining frequent backup records to prevent loss of data
D) counting inventory on hand and comparing counts to the perpetual inventory records
3) Duplicate checking of calculations is an example of a ________ control, and procedures to resubmit rejected
transactions are an example of a ________ control.
A) corrective; detective
B) detective; corrective
C) preventive; corrective
D) detective; preventive
4) The primary purpose of the Foreign Corrupt Practices Act of 1977 was
A) to require corporations to maintain a good system of internal control.
B) to prevent the bribery of foreign officials by American companies.
C) to require the reporting of any material fraud by a business.
D) All of the above are required by the act.
5) Which of the following was not an important change introduced by the Sarbanes-Oxley Act of 2002?
A) new roles for audit committees
B) new rules for auditors and management
C) new rules for information systems development
D) the creation of the Public Company Accounting Oversight Board
6) Which of the below is not a component of the COSO ERM?
A) monitoring
B) control environment
C) risk assessment
D) compliance with federal, state, or local laws
7) The audit committee of the board of directors
A) is usually chaired by the CFO.
B) conducts testing of controls on behalf of the external auditors.
C) provides a check and balance on management.
D) does all of the above.
8) ________ is the risk that exists before management takes any steps to mitigate it.
A) Inherent risk
B) Residual risk
C) Risk appetite
D) Risk assessment

9) The first step of the risk assessment process is generally to

A) identify controls to reduce all risk to zero.
B) estimate the exposure from negative events.
C) identify the threats that the company currently faces.
D) estimate the risk probability of negative events occurring.
10) Whitewater Rapids provides canoes to tourists eager to ride Whitewater River's rapids. Management has
determined that there is one chance in a thousand of a customer being injured or killed. Settlement of resulting
lawsuits has an average cost of $650,000. Insurance with a $50,000 deductible is available. It covers the costs of
lawsuits, unless there is evidence of criminal negligence. What is the impact of this risk without insurance?
A) $50
B) $650
C) $50,000
D) $650,000
11) At a movie theater box office, all tickets are sequentially prenumbered. At the end of each day, the beginning
ticket number is subtracted from the ending number to calculate the number of tickets sold. Cash is counted and
compared with the number of tickets sold. Which of the following situations does this control detect?
A) Some customers presented tickets purchased on a previous day when there wasn't a ticket taker at the theater
entrance (so the tickets didn't get torn.)
B) A group of kids snuck into the theater through a back door when customers left after a show.
C) The box office cashier accidentally gives too much change to a customer.
D) The ticket taker admits his friends without tickets.
12) A store policy that allows retail clerks to process sales returns for $500 or less, with a receipt dated within the
past 30 days, is an example of
A) general authorization.
B) specific authorization.
C) special authorization.
D) generic authorization.
13) The organization chart for Renata Corporation includes a controller and an information processing manager,
both of whom report to the vice president of finance. Which of the following would be a control weakness?
A) assigning the programming and operating of the computer system to an independent control group which reports
to the controller
B) providing for maintenance of input data controls by an independent control group which reports to the controller
C) periodically rotating assignment of application processing among machine operators, who all report to the
information processing manager
D) providing for review and distribution of system-generated reports by an independent control group which reports
to the controller
14) Which of the following is an independent check on performance?
A) The Purchasing Agent physically reviews the contents of shipments and compares them with the purchase orders
he has placed.
B) Production teams perform quality evaluations of the products that they produce.
C) The General Manager compares budgeted amounts with expenditure records from all departments.
D) Petty cash is disbursed by Fred Haynes. He also maintains records of disbursements, places requests to finance to
replace expended funds, and periodically reconciles the petty cash balance.
15) Petty cash is disbursed by the Manuela Luisina in the Cashier's Office. Manuela also maintains records of
disbursements, places requests to the Finance Department to replace expended funds, and periodically reconciles the
petty cash balance. This represents a(n) ________ segregation of duties.
A) ideal
B) effective
C) ineffective
D) limited