Lecture 1

Chapter 1—The Information System: An Accountant’s Perspective

1. What are the responsibilities of operations management, middle management, and top
management? What is the different information needs for each level of management?

2. What are the differences between data and information?

3. Why do auditors need to understand the organizational structure of the business?

4. What are the three major subsystems of the AIS? What are their purposes?

5. What are the three primary functions performed by the transaction processing system?

6. What is the problem of data redundancy?

7. What are the differences between the accounting information system and the management
information system?

8. Why is it important to organizationally separate the accounting function from other functions
of the organization?

9. What are fraud audits and why have they become more common?

10. Contrast centralized data processing (CDP) function with distributed data processing (dpp)
function. How do the roles of end-users differ between the 2 approaches?

11. Discuss how conceptual and physical systems differ and which functions are responsible for
each of these systems.

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Lecture 2
Chapter 3—Ethics, Fraud, and Internal Control

1. internal control activities. List them and provide a specific example of each one.

2. What are the differences between management fraud with employee fraud?

3. Why are the computer ethics issues of privacy, security, and property ownership of interest to
accountants?

4. According to common law, there are five conditions that must be present for an act to be
deemed fraudulent. Name and explain each.

5. Management fraud is regarded as more serious than employee fraud. Three special
characteristics have been discussed for management fraud. What are they? Explain.

6. Four principal types of corruption are discussed. Name and explain all four.

7. Misappropriation of assets can involve various schemes: expense reimbursement fraud,

8. What are the differences between skimming and cash larceny? Give an example of each

9. Why collusion between employees and management in the commission of a fraud is difficult
to both prevent and detect?

10. Since all fraud involves some form of financial misstatement, how is Fraudulent Statement
fraud different?

11. What are the problems associated with lack of auditor independence?

12. What are the problems associated with lack of director independence?

13. What are the problems associated with Questionable Executive Compensation Schemes?
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14. What are the problems associated with inappropriate accounting practices?

15. Why is an Independent Audit Committee important to a company?

16. In this age of high technology and computer-based information systems, why are accountants
concerned about physical (human) controls?

17. What are the non-accounting services that external auditors are no longer permitted to render
to audit clients?

18. What are the factors that constitute the fraud triangle? Why is it important to auditors?

19. Define each of the following input controls and give an example of how they may be used:
a. Missing data check

b. Numeric/alphabetic data check

c. Limit check

d. Range check

e. Reasonableness check

f. Validity check

20. After data is entered into the system, it is processed. Processing control exists to make sure
that the correct things happen during processing. Discuss processing controls.

21. If input and processing controls are adequate, why are output controls needed?

22. What is the grandfather-father-son backup technique?

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Lecture 3
Chapter 2—Introduction to Transaction Processing

1. What are the key activities in the revenue, conversion, and expenditure cycles?

2. Categorize each of the following activities into the expenditure, conversion or revenue cycles
and identify the applicable subsystem.
a. Preparing the weekly payroll for manufacturing personnel.
b. Releasing raw materials for use in the manufacturing cycle.
c. Recording the receipt of payment for goods sold.
d. Recording the order placed by a customer.
e. Ordering raw materials.
f. Determining the amount of raw materials to order.

3. What does an entity-relationship diagram represent? Why do accountants need to understand

4. Time lag is one characteristic used to distinguish between batch and real-time systems.
Explain. Give an example of when each is a realistic choice.

5. The revenue cycle has two subsystems. What are they and what occurs within each?

6. Resource use is one characteristic used to distinguish between batch and real-time systems.
Explain.

7. Give a brief description of each of the following documentation techniques: systems

8. Give an example of how cardinality relates to business policy?

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9. For what purpose are entity relationship (ER) diagrams used?

10. With regards to an entity relationship diagram, what is an entity?

11. Is a DFD an effective documentation technique for identifying who or what performs a
particular task? Explain.

12. Is a flowchart an effective documentation technique for identifying who or what performs a
particular task? Explain.

13. How may batch processing be used to improve operational efficiency?

14. If an organization processes large numbers of transactions that use common data records, what
type of system works best (all else being equal)?

15. Why does an auditor use a program flowchart?

16. How are computer system flowcharts and program flowcharts related?

17. What are the key distinguishing features of legacy systems?

18. What information is provided by a record layout diagram?

19. What factor influences the decision to employ real-time data collection with batch updating
rather that purely real-time processing? Explain.

20. Why is the master file backup procedure important?

21. What are the reasons companies used coding schemes in their accounting information
systems?

22. Compare and contrast the relative advantages and disadvantages of sequential, block, group,
alphabetic and mnemonic codes.

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Lecture 4
Chapter 8—General Ledger, Financial Reporting, and Management Reporting Systems

1. What are the six basic files in the general ledger database?

2. What are the three elements of problem structure? Contrast a structured problem to an
unstructured problem. Describe which levels of management typically deal with structured
problems and with unstructured problems.

3. Many financial reports produced by organizations are nondiscretionary–publicly traded firms

4. There are two basic types of management reports–programmed and ad hoc. Describe each and
give examples.

5. What are three attributes of an effective report?

6. What is the implication for the Management Reporting System of an organization that
implements the formalization of tasks principle?

7. Contrast the four decision types, strategic planning, tactical planning, management control
and operational control, by the four decision characteristics, time frame, scope, level of details,
recurrence, and certainty.

8. What are the role of the journal voucher in both batch and real-time GL systems?

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Lecture 5
Chapter 7—The Conversion Cycle

1. What are the differences in the treatment of inventories in the traditional manufacturing
environment and the lean manufacturing environment?

2. What are the key segregations of duties that should exist in the traditional manufacturing
environment?

3. How does automation help achieve manufacturing flexibility?

4. How does MRP II (manufacturing resource planning) expand on MRP (materials

5. What are the principles underlying the lean manufacturing approach?

6. What are three common problems associated with inventories?

7. Automation is at the heart of the lean manufacturing philosophy. What are its stages and its
distinguishing features.

8. What is meant by the term “product family” and what is its relationship to value stream
accounting?

Lecture 6
Chapter 4—The Revenue Cycle

1. How may an employee embezzle funds by issuing an unauthorized sales credit memo if the
appropriate segregation of functions and authorization controls were not in place?

2. For each of the following documents, describe its purpose, the functional area preparing it,
and the key data included: sales order, bill of lading, credit memo.

3. What features of a reengineered cash receipts system contribute to improved control and
reduced costs? What complicates the process?
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4. What role does each of the following departments play in the sales order processing
subsystem: sales, credit, and shipping? Be complete.

5. With regards to segregation of duties, rule one is that transaction authorization and transaction
processing should be separated. What does this require in the revenue cycle?

6. With regards to segregation of duties, rule two is that asset custody and record keeping should
be separated. What does this require in the revenue cycle?

7. What role does each of the following departments play in the cash receipts subsystem: mail
room, cash receipts, accounts receivable, and general ledger? Be complete.

8. For each of the following documents, describe its purpose, the functional area preparing it,
and the key data included: remittance advice, remittance list, deposit slip.

Lecture 7
Chapter 5—The Expenditure Cycle Part I: Purchases and Cash Disbursements Procedures

1. Differentiate between a purchase requisition and a purchase order.

2. What are the key segregation of duties issues in purchasing and cash disbursements?

3. Supervision is extremely important in the receiving department. Two main reasons were
given. What were they? Why are these important?

4. What are six classes of physical controls employed in the expenditure cycle and give one
example of each?

5. Describe two areas where segregation of duties is important in the expenditure cycle.

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Lecture 8
Chapter 6—The Expenditure Cycle Part II: Payroll Processing and Fixed Asset Procedures

1. The G Berhad makes custom golf clubs. The manufacturing supervisor interviews people who
have specialized manufacturing skills, and he informs payroll when an employee is hired. The
employees use a time clock to record the hours they work. The employees are also required
to keep a record of the time they spend working on each order. The supervisor approves all
timecards.

The accountant analyzes the job tickets and prepares a labor distribution summary. Payroll
prepares the payroll register and paychecks. The supervisor distributes the paychecks to the
employees. Payroll informs cash disbursement of the funds required to cover the entire payroll
amount. The cash disbursements clerk ensures that there are adequate funds in the company's
regular checking account to cover the payroll.

Describe at least three internal control weaknesses; for each weakness suggest an
improvement to internal control.

2. Describe how the Fixed Asset System differs from the expenditure cycle.

3. Three major tasks are handled by the Fixed Asset System. What is the purpose of each? What
special control issues affect each?

4. What are the fundamental risk and control issues associated with fixed assets that are different
from raw materials and finished goods?