END–OF-SEMESTER EXAMINATION
SEMESTER 1, 2006/2007 SESSION
KULLIYYAH OF ECONOMICS AND MANAGEMENT SCIENCES
Programme : [Link] Level of study : 3
Time : 9.00 a.m – 12.00 p.m Date : 14/11/2006
Duration : 3 hours
Course Code : ACC 3310 Section(s) : 1-4
Course Title : Accounting Information Systems
(This Question Paper Consists of 9 Printed Pages With 6 Questions)
DO NOT OPEN UNTIL YOU ARE ASKED TO DO SO
INSTRUCTION(S) TO CANDIDATES
1. ANSWER ALL QUESTIONS
ANY FORM OF CHEATING OR ATTEMPT TO CHEAT IS A SERIOUS OFFENCE WHICH MAY
LEAD TO DISMISSAL
APPROVED BY:
SECTION A: MULTIPLE CHOICE QUESTIONS
1. Objectives of the Fixed Asset System do not include
a. authorizing the acquisition of fixed assets
b. recording depreciation expense
c. computing gain and/or loss on disposal of fixed assets
d. maintaining a record of the fair market value of all fixed assets
2. Why would an organization require the paymaster to deliver all unclaimed paychecks
to the internal audit department?
a. to detect a “phantom employee” for whom a check was produced
b. to prevent an absent employee’s check from being lost
c. to avoid paying absent employees for payday
d. to prevent the paymaster from cashing unclaimed checks
3. Which of the following is not a characteristic of the Fixed Asset System?
a. Acquisitions are routine transactions requiring general authorization.
b. Retirements are reported on an authorized disposal report form.
c. Acquisition cost is allocated over the expected life of the asset.
d. Transfer of fixed assets among departments is recorded in the fixed asset
subsidiary ledger.
4. Which of the following is not a category of critical success factors in most
manufacturing companies?
a. product quality
b. customer service
c. revenue generation
d. resource management
5. An example of a continuous process is the production of
a. wedding invitations
b. milk products
c. jet aircraft
d. all of the above
6. Which statement is not correct?
a. the benchmark approach compares key activities with similar activities in
other firms
b. critical success factors include product and process quality
c. the ABC model includes two perspectives: an allocation of cost perspective
and a process perspective
d. in world-class manufacturing firms, quality control activities at the end of the
process are essential
7. Which report is not an output of the Financial Reporting System (FRS)?
a. variance analysis report
b. statement of cash flows
c. tax return
d. comparative balance sheet
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8. Which situation indicates an internal control risk in the General Ledger/Financial
Reporting Systems (GL/FRS)?
a. the employee who maintains the cash journal computes depreciation expense
b. the cash receipts journal voucher is approved by the Treasurer
c. the cash receipts journal vouchers are prenumbered and stored in a locked safe
d. the employee who maintains the cash receipts journal records transactions in
the accounts receivable subsidiary ledger
9. Which statement is not true? The manager's span of control
a. is narrow for routine and repetitive tasks
b. is related to the number of layers of management
c. affects the amount of detail provided to a manager
d. can affect employee morale and motivation
10. A characteristic of the Management Reporting System (MRS) is
a. the MRS operates in conformity with generally accepted accounting principles
b. it is a legal requirement that the MRS be installed and functioning properly
c. the MRS is developed by implementing SC requirements
d. the MRS focuses on decision-making information
11. Which statement is true?
a. ERPs are infinitely scalable.
b. Performance problems usually stem from technical problems, not business
process reengineering.
c. The better ERP can handle any problems an organization can have.
d. ERP systems can be modified using bolt-on software.
12. Separating the data warehouse from the operations databases occurs for all of the
following reasons except
a. to make the management of the databases more economical
b. to increase the efficiency of data mining processes
c. to integrate legacy system data into a form that permits entity-wide analysis
d. to permit the integration of data from diverse sources
13. XBRL
a. is an accounting-specific markup language based on HTML.
b. controls Web browsers that access the Web.
c. is the document format used to produce Web pages.
d. was designed to provide the financial community with a standardized method
for preparing and publishing financial information.
14. Which one of the following statements is correct?
a. Cookies always contain encrypted data.
b. Cookies are text files and never contain encrypted data.
c. Cookies contain the URLs of sites visited by the user.
d. Web browsers cannot function without cookies.
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15. Which statement is not correct? The audit trail in a computerized environment
a. consists of records that are stored sequentially in an audit file
b. traces transactions from their source to their final disposition
c. is a function of the quality and integrity of the application programs
d. may take the form of pointers, indexes, and embedded keys
16. Which of the following is considered an unintentional threat to the integrity of the
operating system?
a. a hacker gaining access to the system because of a security flaw
b. a hardware flaw that causes the system to crash
c. a virus that formats the hard drive
d. the systems programmer accessing individual user files
17. Which of the following is not a basic database backup and recovery feature?
a. checkpoint
b. backup database
c. transaction log
d. database authority table
18. In an electronic data interchange environment, customers routinely
a. access the vendor's accounts receivable file with read/write authority
b. access the vendor's price list file with read/write authority
c. access the vendor's inventory file with read-only authority
d. access the vendor's open purchase order file with read-only authority
19. All of the following are examples of source document control except
a. prenumbering source documents
b. limiting access to source documents
c. supervising the bursting of source documents
d. checking the sequence of numbers to identify missing documents
20. A computer operator was in a hurry and accidentally used the wrong master file to
process a transaction file. As a result, the accounts receivable master file was erased.
Which control would prevent this from happening?
a. header label check
b. expiration date check
c. version check
d. validity check
[Total: 20 marks]
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SECTION B: SHORT QUESTIONS / PROBLEMS
Question 1
(a) The objective of inventory control is to minimize total inventory cost while ensuring that
adequate inventories exist to meet existing demand from customers. Most organizations
use the inventory model to achieve this objective.
Required:
i. Identify the simplest and most commonly used inventory model.
[1 mark]
ii. What are the assumptions made when firms used the above model? (as per answer
from question (i)).
[2 marks]
(b) The characteristic of world-class manufacturing firms is their success to reduce their
inventories. It could be achieved by adopting the just-in-time (JIT) manufacturing model.
Explain the concept of just-in-time (JIT) together with TWO assumptions on the concept.
[4 marks]
(c) Gabra Fast Food Restaurant owned by Br. Salleh focused on selling western foods. It
includes fried chicken, chicken chop, pizza, pasta, porridge, burgers and sodas. Explain
the procedures involved from order taking until payment made by the customer under the
following environment:
i. The traditional manufacturing environment.
[4 marks]
ii. Computer-integrated manufacturing.
[4 marks]
[Total: 15 marks]
Question 2
(a) You are required to indicate whether the following items are classified under numeric
codes, block codes, sequential codes, mnemonic codes or group codes (you may list
multiple methods). Explain why each method is appropriate.
i. Check number
ii. Bin number
iii. Chart of accounts
iv. Invoice number
v. State codes in mailing address
[7 marks]
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(b) The general ledger system (GLS) database includes a variety of transaction files, master
files, reference files and archive files. The master file is the principle file in the GLS
database. The financial reporting system draws upon the GL master file to produce the
firm’s financial statement while management reporting system uses this file to support
internal information needs.
You are required to draw the record layout for a general ledger master file.
[3 marks]
(c)
Plant Manager
Marketing Production Finance
Manager Manager Manager
Assistant Manager
Supervisor 1 Supervisor 2 Supervisor 3
The above diagram illustrates the organizational hierarchy in a manufacturing company.
i. List TWO types of information flow that could exist in the above organizational
hierarchy. For each flow, describe its purpose.
[4 marks]
ii. Are both flows related to each other?
[1 mark]
[Total: 15 marks]
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Question 3
(a) Consider you are the Plant Manager in a large organisation that had implemented a data
warehouse for internal analysis of corporate data. The production manager has written
you a memo suggesting the organisation to open up the data warehouse to the suppliers
and customers.
i. Explain the meaning of data warehouse.
[2 marks]
ii. Explain the merits to this proposal.
[2 marks]
iii. What are the controls issues need to be highlighted?
[4 marks]
(b) Discuss risks associated with the implementation of Enterprise Resource Planning (ERP)
in the organisation.
[4 marks]
(c) Electronics funds transfers are widely used by individuals to pay their personal bills and
also used by payroll department to transfer payroll for each employees. However, it is not
widely used by businesses for cash disbursements. Explain why.
[3 marks]
[Total: 15 marks]
Question 4
(a) What control would you recommend to prevent the following situations from occurring?
i. A company lost almost all its vital business data in a fire that destroyed the room in
which it stored its magnetic disk and tapes.
ii. During keying of customer payment records, the digit 0 in a payment of RM102.34
was mistakenly typed as the letter O. As a result, the transaction was not processed
correctly, and the customer received an incorrect statement.
iii. An employee gained unauthorized access to the system by observing his supervisor’s
user number and then correctly guessing the password after 12 attempts.
iv. A company’s research and development centre utilizes remote PCs tied into its
computer centre 100 kilometres away. Using a wiretap, the company’s largest
competitor stole secret plans for a major product innovation.
v. A 20-minute power failure that shut down a firm’s computer system resulted in loss of
data for several transactions there were being entered into the system from remote
terminals.
[5 marks]
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(b) Smart Retailing has a high turnover rate among its employees. It maintains a very large
computer system that supports approximately 200 networked PCs. The company
maintains fairly extensive databases regarding its customers. These include customer
profiles, past purchasing patterns, and prices changed.
Recently, the company has been having major problems with competitors. It appears that
one competitor seems to be very effective at taking away Smart’s customers. Most of the
customers have been visited by this competitor, and identical products have been offered
at lower prices in every case.
Required:
i. What is the possible security problem in the above scenario?
[2 marks]
ii. Give recommendations to overcome the security problem.
[3 marks]
(c) “Contracting for a hot site is too costly except in very rare circumstances. Therefore, all
companies should think in terms of providing for a cold site at most.”
Do you agree? Discuss fully.
[5 marks]
[Total: 15 marks]
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SECTION C: CASE STUDY
BioLabs is an independent laboratory that performs research under contract to the
government and non-government entities. The following procedures are used by BioLabs to
process weekly payroll for hourly support and service personnel. BioLabs has a legacy
computer system to which payroll personnel have online access from PCs located on their
desks.
Each week, the computer prints time sheets using the employee/payroll master data. After
receiving the time sheets from IT, the payroll department distributes it to the various
department supervisors who give it to the employees. The employees fill in the time sheets
each day and give them to their supervisors at the end of each week. Department supervisors
review and sign the time sheets and return it to the payroll department. Payroll clerk key-in
the time sheets into the current week’s payroll activity data and then file the time sheets
alphabetically by department.
The computer then creates the current week’s pay data, using the employee/payroll master
data and the current week’s payroll activity data. The paychecks and two copies of payroll
register are then printed from the pay data. The computer operator gets the check-signing
machine from the cashier and signs the paychecks. The paychecks and one copy of the
payroll register are given to the cashier. Another copy of the payroll register is given to the
payroll department.
The cashier checks the total and the number of paychecks against the payroll register. She
sends the paychecks to the department supervisors, who distribute it to the employees.
Required:
i. Draw a logical data flow diagram and a system flowchart for the above procedures.
[12 marks]
ii. Identify the internal control weaknesses and suggest improvements to resolve each
weakness.
[8 marks]
[Total: 20 marks]
END OF QUESTION PAPER