ACTG 313 UPDATED COMPREHENSIVE EXAM QUESTIONS
AND SOLUTIONS GUARANTEE A+
✔✔current - ✔✔up to the present date and time
✔✔objective - ✔✔unbiased; unprejudiced
✔✔relevant - ✔✔reduces uncertainty, improves decision making, or confirms or corrects
prior expectations
✔✔timely - ✔✔provided in time for decision makers to make decisions
✔✔useable - ✔✔easy to use for different task
✔✔understandable - ✔✔easily comprehended and interpreted
✔✔verifiable - ✔✔2 independent, knowledgeable people produce the same information
✔✔machine-readable format - ✔✔Data is most useful when it is in a machine-readable
format that can be read and processed by a computer
✔✔Example of machine-readable format - ✔✔XBRL
can improve characteristics that make info useful
✔✔Business Process - ✔✔Set of related, coordinated, and structured activities and
tasks performed by people, machines, or both to achieve specific organizational goals
✔✔transaction processing - ✔✔using transaction data to create financial statements
✔✔examples of give get exchange: rev, exp, production, payroll, financing cycle -
✔✔Revenue cycle: give goods/service ----- get cash
expense cycle: get goods/service ----- give cash
production cycle: give labor & materials --- get finished goods
payroll cycle: give cash ----- get labor
financing cycle: give cash ---- get cash
✔✔Accounting information systems (AIS) - ✔✔system that collects, records, stores, and
processes date in information used for decision makers
✔✔what is the output of AIS? - ✔✔information
✔✔What does AIS consist of? - ✔✔1. people who use the system
2. processes
3. technology
,4. controls to safeguard info
✔✔How does AIS add value? - ✔✔1. improving quality and reducing costs
2. improve efficiency
3. improving decision making
✔✔Value Chain - ✔✔links together the different activities within the organization that
provide value to the customer
✔✔primary activities - ✔✔directly add value to customer
✔✔support activities - ✔✔enable primary activities to be efficient and effective
✔✔supply chain - ✔✔Extended system that includes the organization's value chain as
well as its suppliers, distributors and customers
✔✔data processing cycle - ✔✔
✔✔data input steps - ✔✔1. capture transaction data triggered by business activity
2. make sure the captured data is accurate and complete
3. ensure company policies are followed
✔✔captured data for data processing cycle - ✔✔activity of interest
resources affected
people who participated in the activity
✔✔where does information come from - ✔✔source documents
✔✔source documents - ✔✔captures data when transaction takes place
✔✔turnaround documents - ✔✔sent to external party then sent back
✔✔chart of accounts - ✔✔A listing of all the numbers assigned to balance sheet and
income statement accounts. The account numbers allow transaction data to be coded,
classified, and entered into the proper accounts. They also facilitate financial statement
and report preparation.
✔✔control account - ✔✔GL account that corresponds to a subsidiary ledger
✔✔specialized journal - ✔✔used for large numbers of repetitive transactions
✔✔sequence codes - ✔✔items numbered consecutively to account for all items
✔✔block codes - ✔✔blocks of numbers reserved for specific categories of data
,An example is a chart of accounts. EXP Refrigerators in 2000
✔✔group codes - ✔✔2 or more subgroups of digits used to code items
Different numbers can stand for a different component 1-2 size 3 color
✔✔mnemonic codes - ✔✔letters and numbers interspersed to identify an item
(Dry300W05) 300=low end W=White 05= made by sears
✔✔subsidiary ledger - ✔✔for each customer and vendor, each account of theirs is
broken down even further
✔✔data storage elements - ✔✔
✔✔Data processing - ✔✔CRUD
✔✔CRUD - ✔✔Creating new records
Reading existing data
Updating previous record or data
Deleting data
✔✔Enterprise Resource Planning (ERP) - ✔✔integrates activities from entire
organization
✔✔ERP - ✔✔
✔✔Advantages of ERP - ✔✔1. streamlines flow of info
2. greater monitoring capabilities
3. standardization of procedures and reports
✔✔disadvantages of ERP - ✔✔1. costly
2. significant amount of time to implement
3. complexity
✔✔Threat - ✔✔any potential adverse occurrence or unwanted event that could injure
the AIS or the organization
✔✔exposure/impact - ✔✔the potential dollar loss should a particular threat become a
reality
✔✔primary objective of AIS - ✔✔to control the organization so the organization can
achieve its objectives
✔✔what does management expect from accountants? - ✔✔1. take a proactive
approach to eliminate system threats
, 2. detect, correct, and recover from threats when they occur
✔✔Foreign Corrupt Practices Act (FCPA) - ✔✔1. to prevent companies from bribing
foreign officials to obtain business
2. requires all publicly owned corporations to maintain a system of internal accounting
controls
✔✔Sarbanes-Oxley Act (SOX) - ✔✔1. report effectiveness of internal controls
2. require CEO/CFO approvement of financial statements
✔✔Major control frameworks - ✔✔1. COBIT
2. COSO
3. COSO-ERM
✔✔COSO's 5 Components of Internal Control - ✔✔1. Control Activities
2. Risk Assessment
3. Information and Communication
4. Monitoring
5. Control Environment
✔✔Control Environment (COSO) - ✔✔1. commitment to integrity and ethical values
2. The board of directors exercises oversight of the development and performance of
internal controls
3. Management establishes the structure, reporting lines, and responsibilities and
appropriate authorities in the pursuit of objective
4. commitment to attract, develop, and retain competent individuals in alignment with
objectives
5. hold individuals accountable for their internal control responsibilities in the pursuit of
their objectives
✔✔Risk Assessment (COSO) - ✔✔6. specifies suitable objectives with sufficient clarity
to ID risks
7. ID and analyze risk to the achievement of its objectives
8. Assesses fraud risk to achievement of objectives
9. ID and analyze significant changes that could affect the system of internal controls
✔✔Control Activities (COSO) - ✔✔10. selects and develops control activities that
contribute to the mitigation of risks
11. selects and develops general control activities over technology
12. deploys control activities through policies that establish what is expected and
procedures that put the policies into action
✔✔Info and Communication (COSO) - ✔✔13. uses relevant, quality information to
support internal controls
14. communicates internally the objectives and responsibilities for internal controls
AND SOLUTIONS GUARANTEE A+
✔✔current - ✔✔up to the present date and time
✔✔objective - ✔✔unbiased; unprejudiced
✔✔relevant - ✔✔reduces uncertainty, improves decision making, or confirms or corrects
prior expectations
✔✔timely - ✔✔provided in time for decision makers to make decisions
✔✔useable - ✔✔easy to use for different task
✔✔understandable - ✔✔easily comprehended and interpreted
✔✔verifiable - ✔✔2 independent, knowledgeable people produce the same information
✔✔machine-readable format - ✔✔Data is most useful when it is in a machine-readable
format that can be read and processed by a computer
✔✔Example of machine-readable format - ✔✔XBRL
can improve characteristics that make info useful
✔✔Business Process - ✔✔Set of related, coordinated, and structured activities and
tasks performed by people, machines, or both to achieve specific organizational goals
✔✔transaction processing - ✔✔using transaction data to create financial statements
✔✔examples of give get exchange: rev, exp, production, payroll, financing cycle -
✔✔Revenue cycle: give goods/service ----- get cash
expense cycle: get goods/service ----- give cash
production cycle: give labor & materials --- get finished goods
payroll cycle: give cash ----- get labor
financing cycle: give cash ---- get cash
✔✔Accounting information systems (AIS) - ✔✔system that collects, records, stores, and
processes date in information used for decision makers
✔✔what is the output of AIS? - ✔✔information
✔✔What does AIS consist of? - ✔✔1. people who use the system
2. processes
3. technology
,4. controls to safeguard info
✔✔How does AIS add value? - ✔✔1. improving quality and reducing costs
2. improve efficiency
3. improving decision making
✔✔Value Chain - ✔✔links together the different activities within the organization that
provide value to the customer
✔✔primary activities - ✔✔directly add value to customer
✔✔support activities - ✔✔enable primary activities to be efficient and effective
✔✔supply chain - ✔✔Extended system that includes the organization's value chain as
well as its suppliers, distributors and customers
✔✔data processing cycle - ✔✔
✔✔data input steps - ✔✔1. capture transaction data triggered by business activity
2. make sure the captured data is accurate and complete
3. ensure company policies are followed
✔✔captured data for data processing cycle - ✔✔activity of interest
resources affected
people who participated in the activity
✔✔where does information come from - ✔✔source documents
✔✔source documents - ✔✔captures data when transaction takes place
✔✔turnaround documents - ✔✔sent to external party then sent back
✔✔chart of accounts - ✔✔A listing of all the numbers assigned to balance sheet and
income statement accounts. The account numbers allow transaction data to be coded,
classified, and entered into the proper accounts. They also facilitate financial statement
and report preparation.
✔✔control account - ✔✔GL account that corresponds to a subsidiary ledger
✔✔specialized journal - ✔✔used for large numbers of repetitive transactions
✔✔sequence codes - ✔✔items numbered consecutively to account for all items
✔✔block codes - ✔✔blocks of numbers reserved for specific categories of data
,An example is a chart of accounts. EXP Refrigerators in 2000
✔✔group codes - ✔✔2 or more subgroups of digits used to code items
Different numbers can stand for a different component 1-2 size 3 color
✔✔mnemonic codes - ✔✔letters and numbers interspersed to identify an item
(Dry300W05) 300=low end W=White 05= made by sears
✔✔subsidiary ledger - ✔✔for each customer and vendor, each account of theirs is
broken down even further
✔✔data storage elements - ✔✔
✔✔Data processing - ✔✔CRUD
✔✔CRUD - ✔✔Creating new records
Reading existing data
Updating previous record or data
Deleting data
✔✔Enterprise Resource Planning (ERP) - ✔✔integrates activities from entire
organization
✔✔ERP - ✔✔
✔✔Advantages of ERP - ✔✔1. streamlines flow of info
2. greater monitoring capabilities
3. standardization of procedures and reports
✔✔disadvantages of ERP - ✔✔1. costly
2. significant amount of time to implement
3. complexity
✔✔Threat - ✔✔any potential adverse occurrence or unwanted event that could injure
the AIS or the organization
✔✔exposure/impact - ✔✔the potential dollar loss should a particular threat become a
reality
✔✔primary objective of AIS - ✔✔to control the organization so the organization can
achieve its objectives
✔✔what does management expect from accountants? - ✔✔1. take a proactive
approach to eliminate system threats
, 2. detect, correct, and recover from threats when they occur
✔✔Foreign Corrupt Practices Act (FCPA) - ✔✔1. to prevent companies from bribing
foreign officials to obtain business
2. requires all publicly owned corporations to maintain a system of internal accounting
controls
✔✔Sarbanes-Oxley Act (SOX) - ✔✔1. report effectiveness of internal controls
2. require CEO/CFO approvement of financial statements
✔✔Major control frameworks - ✔✔1. COBIT
2. COSO
3. COSO-ERM
✔✔COSO's 5 Components of Internal Control - ✔✔1. Control Activities
2. Risk Assessment
3. Information and Communication
4. Monitoring
5. Control Environment
✔✔Control Environment (COSO) - ✔✔1. commitment to integrity and ethical values
2. The board of directors exercises oversight of the development and performance of
internal controls
3. Management establishes the structure, reporting lines, and responsibilities and
appropriate authorities in the pursuit of objective
4. commitment to attract, develop, and retain competent individuals in alignment with
objectives
5. hold individuals accountable for their internal control responsibilities in the pursuit of
their objectives
✔✔Risk Assessment (COSO) - ✔✔6. specifies suitable objectives with sufficient clarity
to ID risks
7. ID and analyze risk to the achievement of its objectives
8. Assesses fraud risk to achievement of objectives
9. ID and analyze significant changes that could affect the system of internal controls
✔✔Control Activities (COSO) - ✔✔10. selects and develops control activities that
contribute to the mitigation of risks
11. selects and develops general control activities over technology
12. deploys control activities through policies that establish what is expected and
procedures that put the policies into action
✔✔Info and Communication (COSO) - ✔✔13. uses relevant, quality information to
support internal controls
14. communicates internally the objectives and responsibilities for internal controls
