University of the South Pacific

School of Accounting and Finance

Semester 2, 2016

AF121 Introduction to Accounting Information Systems (Print Mode)

Mid-Semester Test

Instructions

This test has a total mark of 80 and carries a 35% weighting towards your overall
course grade

There are xx pages in this test paper, including this cover page

You have 120 minutes to complete this paper and an additional 10 minutes reading
time

Answer all questions

You may use a hand-held, non-programmable calculator. This is not supplied.

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_________________________________________________________________________

SECTION A MULTIPLE CHOICE QUESTIONS 30 marks____

Circle the BEST answer for each of the following multiple-choice questions in the answer
grid provided in the answer booklet. Each multiple-choice question is worth one (1) mark.

1. Many modern accounting software packages offer separate transaction cycle modules. What is
the reason for this?

A. Every organization does not need to implement all of the available transaction cycle
modules.
B. Most businesses do not need the revenue cycle module as part of their AIS.
C. The nature of a given transaction cycle is the same irrespective of the type of organization.
D. A properly designed AIS does not use the concept of separate business transaction cycles to
process transactions.

2. Which of the following is a true statement?

A. Business strategy directly influences AIS, but not information technology.

B. Information technology directly influences organizational culture, but not business strategy.
C. Organizational culture directly influences business strategy, but not AIS.
D. AIS directly influences information technology, but not business strategy.

3. When the AIS provides information in a timely and accurate manner, it stands as an example
of

A. improved decision making.

B. improving the quality and reducing the costs of products or services.
C. improving efficiency.
D. all of the above

4. An accounting information system must be able to perform which of the following tasks?

A. collect transaction data

B. process transaction data
C. provide adequate controls
D. all of the above

5. One group that relies on both the adequate collection and transformation of data for decision-
making purposes for an organization is

A. management.
B. interested outsiders.
C. competitors.
D. the government.

6. Pre-numbering of source documents helps to verify that:

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 A. documents have been used in order
B. company policies were followed
C. all transactions have been recorded
D. source data automation was used to capture data

7. In transaction processing, generally which activity comes first?

A. Recording data in a journal

B. Posting items to special journals
C. Capturing data on source documents
D. Recording data in a general ledger

8. Which of the following statements is true?

A. Batch processing ensures that stored information is always current

B. Batch input is more accurate than on-line data entry
C. On-line batch processing is a combination of real-time and batch processing
D. Batch processing is not frequently used

9. A purchase requisition is a common source document used to facilitate which business

activity?

A. Customer sale
B. Purchase request
C. Receipt of goods
D. Inventory purchase

10. Which of the following is conceptually similar to a journal in a manual AIS?

A. Database
B. Master file
C. Record
D. Transaction file

11. Which of the following is NOT true about Accounting Information Systems (AISs)?
A. All AIS are computerized
B AIS may report both financial and nonfinancial information
C. AIS, in addition to collecting and distributing large amounts of data and information, also
organize and store data for future issues
D. A student who has an interest in both accounting and IT, will find many job opportunities
that combine these knowledge and skills areas

12. Which of the following is likely to be information rather than data?

A. Sales price
B. Customer number
C. Net profit
D. Employee name

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13. Which respect to computerized AIS, computers:
A. Turn data into information in all cases
B. Make audit trails easier to follow
C. Cannot catch mistakes as well as humans
D. Do not generally process information more quickly than humans

14. Which of the following is NOT an example of a computer fraud?

A. Entering invoices in the AIS for services that were not provided and depositing the cheque
in a private bank account
B. Sending an email to everyone in your address book asking for a $1 donation
C. Programming a change to decrease the dividend payment to stockholders to a firm and
issuing an cheque to your friend for the total change.
D. Using a university computer to set up a realistic looking virtual “store front” to sell toys,
although you don’t have any – you just don’t have time to get a real job and need some
money to cover the rent.

15. What is it called when someone intentionally changes data before, during, or after they are
entered into the computer (with the intent to illegally obtain information or assets)?
A. Trojan Horse
B. Logic Bomb
C. Data diddling
D. A Cookie

16. Smishing is a form of:

A. Fishing
B. Local Area Network
C. Computer Worm
D. Identity Theft

17. While setting up the opening balances for a company, Jone observes an amount of $4,532
in the “Amount Left to be allocated.” Which of the following is a NOT possible reason for
this?

A. Jone entered GST Paid as a negative figure

B. Jone entered Accumulated Depreciation as a positive figure
C. Jone entered the amount for an account incorrectly
D. Jone did not enter one of the liability accounts

18. Mere is the owner of FijiCatering. She created her company file and saved it in the C Drive
of her computer. MYOB created two file types: FijiCatering.myo and FijiCatering.box. She
now wants to take the file home so she can complete her work on her Personal Computer at
home. Which of the following is INCORRECT with regards to transferring an MYOB file
from one PC to another?

A. Mere could email the MYOB file to herself and access it from home
B. Mere can copy the file to her flash drive
C. Mere has to copy both the *.myo and *.box file in order for the MYOB file to open at
home
D. Mere has to copy only one of the files in the PLUS19ED folder
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19. Vijay uses MYOB to process his accounts. His computer settings is set to US(English).
He receives an invoice from Vinod Patel for 10 bags of cement. The date on the invoice
is 29/08/2015. Vijay enters the date of the transaction into MYOB as stated on the
invoice.

Which of the following is INCORRECT with regards to this?

A. MYOB will not accept the date entered by Vijay

B. Vijay has to enter the date in the format: mm/dd/yy
C. Vijay can enter the date according to the format on the invoice if he changes the computer
settings to UK (English)
D. MYOB will automatically detect that 29 is a day as it is greater than 12 and will adjust
the date accordingly

20. Tanya has recorded a purchase bill in MYOB. Joseph who also has access to MYOB
accidentally deletes the bill created by Tanya. Which of the following is CORRECT with
respect to this?
A. The deleted bill is in the Recycle bin and can be restored
B. As long as the file has yet to be saved, the bill can be recovered
C. Tanya simply has to click on the Undo button to reverse the deletion by Joseph
D. The record has been deleted and it has to be re-entered again

21. By default, Accounts in MYOB will be set to which tax code?

A. N-T
B. GST
C. CAP
D. TAX

22. When entering transactions in the thirteenth period, dates must be prefixed with which of
the following?
A. #
B. $
C. *
D. %

23. Which of the following statements is FALSE?

A. The trial balance is a list of the active general ledger accounts with debit and credit
balances.
B. A balanced trial balance guarantees that there are no errors in the nominal ledger
entries.
C. An unbalanced trial balance indicates that an error is present.
D. Trial Balance while not as useful as financial reports for assisting managers make

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 decisions are useful for recording account balances according to the chart of accounts.

24. Which of the following is INCORRECT with regards to the following screenshot?

A. By default, MYOB does not require a password for users to sign on

B. You can only use the Administrator User ID if you have administrator privileges on
your PC
C. You can sign on by simply clicking on OK without entering a password
D. MYOB allows you to create a password whenever you want

25. In a document flowchart, what symbol represents a decision?

A. Diamond
B. Rectangle
C. Parallelogram
D. Circle

26. Which of the following is NOT a criteria for an account to be deleted in MYOB?
A. It must be a level 1 account
B. It must not be linked to any transactions
C. It must have a zero balance
D. It must be inactive for at least 2 years

27.
Which of the following is INCORRECT with respect to the 13th month in MYOB?
A. It is the conversion month
B. It is an accounting period option when setting up the company
C.
To enter transactions in the 13th period, users must enter the date preceded by an asterisk
D. It is generally used by accountants to pass adjustments so as not to distort other months

28. Management fraud is mostly committed by?

A. Top Level Managers
B. Middle Level Managers
C. Low Level Managers
D. A VAT refund cannot be claimed on the product

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29. A data flow diagram helps a reader to understand:
A. The data structures of tables
B. The resources involved in transactions
C. The destinations of important reports
D. The logical operations of programs

30. Which of the following is NOT an option in MYOB’s Easy Setup Assistant?
A. Accounts
B. Sales
C. Inventory
D. Customize

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SECTION B: SHORT ANSWER QUESTIONS: (25 marks)

Question 1

‘Since nearly all accounting functions today are computerised, there is really no need for
accountants to have an understanding of manual accounting systems.’ Do systems designers need
to understand manual accounting systems? Discuss.

Despite the growth in demand for computerised accounting packages being used in
business, there is always demand for students and accountants who have an underlying
basic accounting knowledge. For example, to understand how MYOB, Quick Books and
other computerised packages work, you need to understand the basic workings of a
manual accounting system (on which these computerised programs are modelled).
Manual accounting systems studied in introductory accounting courses form the basis for
understanding accounting and the financial reporting process. For this reason the study
of manual systems is paramount to understanding basic business transactions and the
associated practice. As indicated in the chapter, computerised accounting systems make
extensive use of control accounts/subsidiary ledgers, and adapt the principles underlying
special journals.
(5 marks)

Question 2

Define general, application and output controls and provide specific examples of each with
relation to MYOB.

General Controls relate to the overall IT system and may deal with access controls and data security.
In MYOB general controls relate to the access to the MYOB. Users can set passwords and restrict
access to users.

Application controls control the inputs, processing and outputs of an AIS application. In MYOB, users
can also specify controls that reduce the risk of errors being made in the input of data in MYOB. For
instance users can prevent other users from entering in duplicate cheque numbers.

Output Controls help ensure the accuracy, completeness, and security of outputs that result from
application processing. An example of this in MYOB is the historical balancing (Account No.# 3-
9999). This account is created if the opening balances does not balance that is the accounting
equation is not satisfied. This account also accumulates other errors made during posting in MYOB.
This account ensures that the statement of financial performance is balanced in MYOB and provides
an opportunity for the user to correct the errors in MYOB.

(9 marks)

Question 3

What is a purchase order and give three (3) reasons companies use purchase orders?

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 A purchase order (PO) is a commercial document and first official offer issued by a
buyer to a seller, indicating types, quantities, and agreed prices for products or services.

• Purchase orders allow buyers to clearly and explicitly communicate their intentions to
sellers

• Sellers are protected in case of a buyer's refusal to pay for goods or services

• Purchase orders help a purchasing agent to manage incoming orders and pending orders

• Purchase orders provide economies in that they streamline the purchasing process to a
standard procedure

(5 marks)

Question 4

Describe the steps to add an account in MYOB

i.) On the menu bar click on Setup

ii.) Click on Easy Setup Assistant
iii.) Click on the New Button
iv.) Click on the drop down menu Account Type
v.) Select Account Type
vi.) Enter the Account Number and Account Name
vii.) Click OK

(6 marks)

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______________________________________________________________________________

SECTION C Case Study (25 marks)_

At the Suva City Council, mail was sorted in a glorified closet – not the sort of place you’d
expect to be frequented by a high-ranking city official with multiple degrees. But the city of
Suva’s chief financial officer, Ed Sims, had an unusual interest in the mail. He was often known
to greet the postal carrier at the door to receive the day’s delivery, take it to the mail closet, then
immediately remove selected envelopes and parcels and take them to the privacy of his own
office. Other times, he would request hand delivery of incoming payments, circumventing the
mail closet altogether. These activities were part of an elaborate embezzlement scheme that
resulted on the loss of millions of dollars for the city. Mr. Sims was intercepting checks written
to the city and endorsing them to his personal bank account. The procedural manual for Suva’s
accounting department described mailroom policies, including the requirement for a clerk to log
cheques into a computer file and prepare a receipt. Another employee was responsible for
preparing an independent verification of the amount of the receipts, and a third employee made
the bank deposit. Despite these written guidelines, Mr. Sims was often known to carry out some
of these tasks himself or claim to be doing so. In response to the news of this fraud, the CFO of a
neighboring community commented that many councils are unable to achieve strong internal
controls because of the limitations of small staff size and tight operating budgets. Rather,
councils often have no choice but to rely on the integrity of their employees.

Required:

a. Draw a process map of how cheques from customers are supposed to be received, recorded
and deposited based on the procedural manual?

(8 marks)

b. Which internal control activity was violated in order for Mr. Sims to perpetrate this fraud?

A case could be made for any or all of the internal control activities were violated in this
scenario. With regard to authorization, it can be said that Mr. Sims abused his authority by
circumventing the established controls in order to carry out these transactions on his own. His

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interference in the mailroom procedures made it impossible for any segregation of duties to
occur. There was apparently inadequate security and documentation for the assets and
transactions with which he was involved, and there was no one willing to come forward to
review or reconcile these transactions.

(5 marks)

c. Was the city’s procedural manual adequate for prescribing internal controls to prevent this
type of fraud? Why or why not?

Although the case states that written guidelines were in place regarding the mailroom and bank deposit
policies, requirements for logging checks received and performing an independent verification of
receipts, these guidelines were obviously not followed when Mr. Sims stepped in. Rather than being a
problem with the documented policies, this case seems to present a situation marked by circumvention
of controls.

(5 marks)

d. Do you think a business in Springfield could be guilty of customer fraud if it agreed to deliver
its payments to Mr. Sims personally rather than send them to the city’s mailing address?

A business that agreed to deliver its payments to Mr. Sims personally would not likely be guilty of fraud.
Customer fraud requires the intent to deceive, so unless the business had knowledge or was otherwise
involved in Mr. Sims’ fraud scheme, it would not be guilty of customer fraud.

(5 marks)

e. The comments made by the neighbor CFO express which type of limitation of internal control
systems discussed?

The limitation of small staff size typically means that the business organization does not have sufficient
resources to accomplish segregation of duties. Accordingly, controls can be easily circumvented. The
comment regarding the tight operating budget reflects upon the cost/benefit limitations of internal
controls.

(5 marks)

THE END -

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