Accounting Information Systems 13th Edition By Marshall-B.-Romney - Test Bank

Accounting Information Systems, 13e (Romney/Steinbart) Chapter 3 Systems Documentation Techniques 3.1 Prepare and use data flow diagrams to understand, evaluate, and document information systems. 1) Graphical representations of information are often supplemented by A) narrative descriptions. B) relevant e-mail communications. C) logic charts. D) oral descriptions from management. Answer: A Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 2) All of the following are guidelines for preparing data flow diagrams except A) show the most detail in the highest-level DFD. B) include all storage files, even if they are only temporary. C) uniquely name all data flows. D) sequentially number process bubbles. Answer: A Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 3) The Sarbanes-Oxley Act requires independent auditors to A) create flowcharts to document business processes. B) understand a client's system of internal controls. C) establish effective internal controls. D) prepare and understand all types of system documentation. Answer: B Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 4) The passage of the Sarbanes Oxley Act A) made documentation skills even more important. B) requires public companies to prepare an annual internal control report. C) mandates that auditors must be able to prepare, evaluate and read documentation tools such as flowcharts. D) all of the above Answer: D Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 5) Which of the following is not a true statement? A) Documentation tools save an organization both time and money. B) Documentation tools are used extensively in the systems development process. C) Data flow diagrams and flowcharts are the two most frequently used systems development documentation tools. D) Data flow diagrams and flowcharts are difficult to prepare and revise using software packages. Answer: D Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 6) A data flow diagram A) is a graphical description of the source and destination of data that shows how data flow within an organization. B) is a graphical description of the flow of documents and information between departments or areas of responsibility. C) is a graphical description of the relationship among the input, processing, and output in an information system. D) is a graphical description of the sequence of logical operations that a computer performs as it executes a program. Answer: A Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 7) In a DFD, a "data sink" is also known as a A) data store. B) transformation process. C) data flow. D) data destination. Answer: D Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 8) In preparing a DFD, when data are transformed through a process, the symbol used should be A) a circle. B) an arrow. C) a square. D) two horizontal lines. Answer: A Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 9) In general, a data destination will be shown by A) an arrow pointing away. B) an arrow pointing in. C) arrows pointing both ways. D) no arrows, only two horizontal lines. Answer: B Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 10) In a data flow diagram of the customer payment process, "update receivables" will appear above or in A) a square. B) a circle. C) two horizontal lines. D) none of the above Answer: B Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 11) In a data flow diagram of the customer payment process, "Customer" will appear above or in A) a square. B) a circle. C) two horizontal lines. D) none of the above Answer: A Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 12) In a data flow diagram of the customer payment process, "Customer payment" will appear above or in A) a square. B) a circle. C) two horizontal lines. D) an arrow. Answer: D Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 13) Most processes on a DFD can be identified by A) data in-flows only. B) data out-flows only. C) data flows both into or out of a process. D) always being followed by a data store. Answer: C Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 14) More than one arrow is needed between symbols on a DFD if A) data elements always flow together. B) data elements flow at different times. C) data elements flow to different locations. D) there is no guideline on use of single or multiple arrows. Answer: B Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 15) A DFD created at the highest-level or summary view is referred to as a A) process diagram. B) overview diagram. C) content diagram. D) context diagram. Answer: D Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 16) In a payroll processing DFD, the "prepare reports" activity will be represented by ________, the "employee payroll file" will be represented by ________, and the "management" will be represented by ________. A) a circle; two horizontal lines; a square B) a circle; two horizontal lines; two horizontal lines C) a rectangle; a square; a circle D) a square; two horizontal lines; a circle Answer: A Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 17) The American Bread Company is a small restaurant that collects, stores, prepares and provides meals to customers in Miami, Florida. When food is received, it is recorded in a database and a receiving ticket is provided to the vendor. When food is used, the database is updated so that it always reflects the amount and type of food available to customers. In a data flow diagram, which type of symbol would be used to represent vendors? A) B) C) D) Answer: A Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 18) The American Bread Company is a small restaurant that collects, stores, prepares and provides meals to customers in Miami, Florida. When food is received, it is recorded in a database and a receiving ticket is provided to the vendor. When food is used, the database is updated so that it always reflects the amount and type of food available to customers. In a data flow diagram, which type of symbol would be used to represent the system processing food received from the vendor? A) B) C) D) Answer: B Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 19) The American Bread Company is a small restaurant that collects, stores, prepares and provides meals to customers in Miami, Florida. When food is received, it is recorded in a database and a receiving ticket is provided to the vendor. When food is used, the database is updated so that it always reflects the amount and type of food available to customers. In a data flow diagram, which type of symbol would be used to represent the storage location of data in the system? A) B) C) D) Answer: D Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 20) The American Bread Company is a small restaurant that collects, stores, prepares and provides meals to customers in Miami, Florida. When food is received, it is recorded in a database and a receiving ticket is provided to the vendor. When food is used, the database is updated so that it always reflects the amount and type of food available to customers. In a data flow diagram, which type of symbol would be used to represent the process of updating the company's inventory records in the system? A) B) C) D) Answer: B Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 21) The American Bread Company is a small restaurant that collects, stores, prepares and provides meals to customers in Miami, Florida. When food is received, it is recorded in a database and a receiving ticket is provided to the vendor. When food is used, the database is updated so that it always reflects the amount and type of food available to customers. In a data flow diagram, which type of symbol would be used to represent the flow of data provided by the vendors into the system? A) B) C) D) Answer: C Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 22) Terrell and Monique Anderson run an antique store in their hometown of Dayton, Ohio. To find items to sell in their shop, they travel around the United States and Europe buying unique artifacts. Within an hour of making a purchase, they use their smartphone to take a picture of the item and post a short tweet about the item on Twitter. Then, they ship the item back to Dayton for sale in their shop. Which symbol should be used to represent Twitter in a context diagram of this process? A) B) C) D) Answer: A Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 23) Terrell and Monique Anderson run an antique store in their hometown of Dayton, Ohio. To find items to sell in their shop, they travel around the United States and Europe buying unique artifacts. Within an hour of making a purchase, they use their smartphone to take a picture of the item and post a short tweet about the item on Twitter. Which symbol should be used to represent the preparation of data for their tweet in a context diagram of this process? A) B) C) D) Answer: B Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 24) Terrell and Monique Anderson run an antique store in their hometown of Dayton, Ohio. To find items to sell in their shop, they travel around the United States and Europe buying unique artifacts. Within an hour of making a purchase, they use their smartphone to take a picture of the item and post a short tweet about the item on Twitter. Which symbol should be used to represent the transfer of data to Twitter in a context diagram of this process? A) B) C) D) Answer: C Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 25) Terrell and Monique Anderson run an antique store in their hometown of Dayton, Ohio. To find items to sell in their shop, they travel around the United States and Europe buying unique artifacts. Within an hour of making a purchase, they use their smartphone to take a picture of the item and post a short tweet about the item on Twitter. Which symbol should be used to represent the remote server that stores the tweets (i.e., the Twitter posts) data? A) B) C) D) Answer: D Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 26) Chas Mulligan has been hired by Yardley Security as an assistant to the internal auditor. He has been asked to document the existing accounting information system, and focus on the activities and flow of data between activities. He decides to begin with a summary description of the sources and uses of data in the organization and how they are processed by the system. The documentation tool that he should employ for this purpose is a A) data flow diagram. B) document flowchart. C) system flowchart. D) program flowchart. Answer: A Objective: Learning Objective 1 Difficulty: Moderate AACSB: Reflective Thinking 27) A well-planned and drawn level 0 data flow diagram for the expenditure cycle would show which of the following processes? A) 1.0 Order Goods; 2.0 Receive and Store Goods; 3.0 Pay for Goods B) 1.0 Order Goods; 1.1 Receive and Store Goods; 1.2 Pay for Goods C) 0.1 Order Goods; 0.2 Receive and Store Goods; 0.3 Pay for Goods D) 0.1 Order Goods; 0.12 Receive and Store Goods; 0.13 Pay for Goods Answer: A Objective: Learning Objective 1 Difficulty: Moderate AACSB: Reflective Thinking 28) A well-planned and drawn context data flow diagram will include how many processes? A) one B) between 5 and 7 C) between 2 and 7, but no more than 7 D) as many as are needed to accurately depict the process being documented Answer: A Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 29) Data flow diagrams depict A) processes, but not who is performing the processes. B) processes, but not the data that flows between processes. C) who is performing processes, but not how they perform the process. D) who is performing processes, but not the data that flows between processes. Answer: A Objective: Learning Objective 1 Difficulty: Difficult AACSB: Reflective Thinking 30) Which is the correct label for the blank transformation process circle in the data flow diagram below? A) 1.2 Check Credit B) 1.2 Enter Order in Sales Journal C) 1.2 Does Customer Have Credit? D) 1.2 Salesperson Approves Answer: A Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 31) In the data flow diagram below, inventory is a A) data store. B) data source. C) data flow. D) data source and destination. Answer: A Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 32) Discuss the ways in which information professionals interact with documentation tools and the various levels of understanding necessary. Answer: At a minimum, a professional should be able to read documentation. A professional may also be called upon to evaluate internal control system documentation in order to identify control strengths and weaknesses or recommend improvements. A professional may be engaged to prepare documentation, which requires the greatest amount of skill and understanding of a particular system. Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 33) Explain two reasons why it is important to have a working knowledge of DFDs and flowcharting. Answer: First, SOX requires auditors to evaluate internal control systems. Data flow diagrams and flowcharts are the two most frequently used development and documentation tools used in practice. Second, since systems development is extremely complex, DFDs and flowcharts are tools that are used to create order from chaos and complexity. Third, documentation tools and concepts are covered on the CPA exam. Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 34) What does the Sarbanes-Oxley Act require that is relevant to documentation tools? Answer: The Sarbanes-Oxley Act requires that independent auditors understand the automated and manual procedures an entity uses. One of the best ways to gain this understanding is to use the flowcharts to document the internal control system, as weaknesses and strengths are more easily spotted from such graphic portrayals. Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 35) Describe a situation in which data flow should be shown with two data flow lines instead of one. Answer: A data flow may consist of one or more pieces of datum. The determining factor is whether the data elements always flow together at the same time. For example, "customer payment" have both payment and remittance data. Since these elements always flow together, only one data flow line is required. However, data flows between the customer and the payment processes have customer inquiries and cash receipts; these data items do not always flow together at the same time. In such a case, two data flow lines will be shown. Objective: Learning Objective 1 Difficulty: Moderate AACSB: Reflective Thinking 36) Describe the different levels of DFDs. Answer: The highest-level or summary view DFD, which shows major inputs/outputs and a single process is called a context diagram. The DFD itself shows inputs, major processes, and outputs; each process in the DFD can be "exploded" or shown in greater level of detail with the sub-processes and related data flows. Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 37) How is a DFD different from a flowchart? Answer: The purpose of a DFD is to diagram the origins, flow, transformation, storage, and destination of data. The purpose a flowchart is to present a graphical description of the flow of documents, relationships among input, processing, and output, or the sequence of logical operations in an information system or program. A DFD is limited to basic symbols and lines, and focuses on the flow and use of data. A flowchart will generally be more complex, and more focused on the managerial, AIS, or IS aspects of the organization. Objective: Learning Objective 1 Difficulty: Difficult AACSB: Reflective Thinking 38) Explain the relevance of the Sarbanes Oxley Act to the documentation tools presented in this chapter. Answer: The Sarbanes Oxley Act of 2002 requires executives of public companies to document and evaluate internal controls. External auditors must evaluate management's assessment of internal control and attest to its accuracy. Therefore, company executives and the auditors must document and test the internal controls — documentation tools, such as flowcharts, are used to do this. Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 39) Discuss the idea of a data flow. Answer: A data flow is a graphic representation of the flow of data between processes, data stores, and data sources and destinations. A data flow is really a form of communication. When the analyst draws a curved or straight line with an arrow at one end, what is represented is a form of communication among the other elements of the data flow process. Consider for example a data source being depicted by a box. The box represents a data source. Data then is sent from the source to a circle, which represents a transformation process. The source of data sends the flow to the transformation process, which will process the data and somehow use the data or turn it into useful information. Note that data flows can represent one or more pieces of datum. Because data flows may have more than one data element, the analyst must determine whether to show one or more lines. Good DFDs and data flow lines in such diagrams eliminate the need for users and analysts to "infer" what type of information is flowing. Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 40) What is the value of using a context diagram when working with DFDs? Answer: In order to create a useful DFD, the analyst must determine system boundaries—what is to be included or excluded from the system. A context diagram will help to achieve this goal, since it is a good way to depict the boundaries of the system. The analyst first creates a context diagram by placing a circle in the middle of the diagram. The circle represents the system under consideration. On either side of the circle, boxes are created which represent outside entities the system interacts with directly. Data flow lines are drawn to show the direction of the flow of data. After this pictorial representation has been completed, the analyst can then better assess the boundaries of the system and amount of interaction between the system and outside entities. Objective: Learning Objective 1 Difficulty: Moderate AACSB: Reflective Thinking 41) Identify five important guidelines for drawing a DFD. Select one from your list and describe why it could be the most important one to consider when preparing a DFD. Support your choice with an example. Answer: Understand the system. Ignore certain aspects of the system (such as control processes and control actions). Determine system boundaries. Develop a context diagram. Identify data flows. Group data flows. Identify transformation processes. Group transformation processes. Identify all files or data stores. Identify all data sources and destinations. All DFD elements are named. Subdivide the DFD. Give each process a sequential number. Repeat the process. Prepare a final copy. (Student answers will vary depending on the items chosen and the quality of their argument. The text provides various items that could be used to answer this question.) Objective: Learning Objective 1 Difficulty: Moderate AACSB: Reflective Thinking 42) Following is a context diagram for a current Payroll Processing System. a) Identify the data sources and destinations, data flows, and transformation process marked by question marks. b) What would you need to do to explode this diagram? Answer: 1 - Human resources, 2 - Time cards, 3 - Payroll processing system, 4 - Employee paychecks or pay-stubs, 5- Payroll report, 6 - Government agencies, 7- Banks. To explode this diagram, additional information is needed to identify detailed procedures within the payroll processing activity as well as additional inputs and outputs. It would be useful to obtain a comprehensive narrative of the payroll processing procedures for review and identification of these items. If there is no narrative available, interviews are another source of information. Objective: Learning Objective 1 Difficulty: Difficult AACSB: Reflective Thinking 43) True or False: The Sarbanes-Oxley Act requires auditors to create flowcharts to document business processes. Answer: FALSE Objective: Learning Objective 1 Difficulty: Moderate AACSB: Reflective Thinking 44) In the data flow diagram below, Shipping is a A) data store. B) data flow. C) data source. D) data destination. Answer: D Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 45) In the data flow diagram below, which process happens first? A) Respond to customer inquiries B) Take order C) Check inventory availability D) Approve order Answer: B Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 46) True or False: In the data flow diagram below, a customer order must be approved before the company checks to make sure the inventory is available. Answer: FALSE Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 47) In a data flow diagram of the vendor payment process, what symbol would most appropriately reflect an update of the payables account? A) a square B) a circle C) two horizontal lines D) none of the above Answer: B Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 48) In a data flow diagram of the vendor payment process, "Vendor" will appear above or in A) a square. B) a circle. C) two horizontal lines. D) none of the above Answer: A Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 49) In a data flow diagram, an inverted triangle represents A) an internal control. B) document filing. C) on page connection. D) document processing. Answer: A Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 50) In a data flow diagram that depicts a company's internal controls, where is each internal control typically explained in detail? A) in an annotation on the same page as the internal control B) inside the symbol used to represent the internal control C) on a table that accompanies the internal control data flow diagram D) Internal controls are not typically explained in detail in an internal control data flow diagram. Answer: C Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 51) Which documentation technique would not depict the type of storage medium used (such as a flash drive or a hard drive) to physically store data? A) system flowchart B) data flow diagram C) business process diagram D) internal control flowchart Answer: B Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 52) In a data flow diagram of the order shipping process, what symbol would most appropriately denote a "Bill of Lading" used in the process? A) a square B) a circle C) two horizontal lines D) an arrow Answer: D Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 3.2 Prepare and use flow diagrams to understand, evaluate, and document information systems. 1) The correct label for Shape 1 in the flowchart below is A) Purchase Order 3 B) Purchase Requisition 1 C) Accounts Payable Trial Balance D) Purchase Order 2 Answer: D Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 2) The correct label for Shape 2 in the flowchart below is A) 1 B) Purchase Requisition 1 C) Receiving Report 1 D) 2 Answer: A Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 3) The correct label for Shape 3 in the flowchart below is A) Purchase Order 1. B) Purchase Requisition 1. C) Receiving Report 1. D) 4. Answer: B Objective: Learning Objective 2 Difficulty: Difficult AACSB: Analytic 4) The correct shape for the triangle labeled "Supplier" in the flowchart below should be a A) magnetic disk. B) terminal. C) manual process. D) off-page connector. Answer: B Objective: Learning Objective 2 Difficulty: Moderate AACSB: Analytic 5) When preparing a document flowchart, the names of organizational departments or job functions should appear in the A) column headings. B) right-hand margin. C) written narrative accompanying the flowchart. D) title of the flowchart. Answer: A Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 6) Flowchart symbols A) are divided into four categories. B) are unique to the organization creating the flowchart. C) are normally drawn using a flowcharting template. D) eliminate the need for narrative descriptions or explanations. Answer: A Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 7) Which is a true statement regarding the use of the manual processing symbol in a flowchart? A) If a document is moved from one column to another, show the document only in the last column. B) Each manual processing symbol should have an input and an output. C) Do not connect two documents when moving from one column to another. D) Use a manual processing symbol to indicate a document being filed. Answer: B Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 8) Which is a true statement regarding a document flowchart? A) A document flowchart illustrates the sequence of logical operations performed by a computer. B) A document flowchart is particularly useful in analyzing the adequacy of internal control procedures. C) A document flowchart is more useful than a data flow diagram. D) A document flowchart is not normally used in evaluating internal control procedures. Answer: B Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic Use the chart below to answer the following questions regarding flow chart symbols. 9) Which symbol would be used in a flowchart to represent a computer process? A) #1 B) #2 C) #5 D) #15 Answer: C Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 10) Which symbol would be used in a flowchart to represent a decision? A) #10 B) #16 C) #9 D) #6 Answer: A Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 11) Which symbol would be used in a flowchart to represent an invoice sent to a customer? A) #2 B) #6 C) #1 D) #15 Answer: C Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 12) Which symbol would be used in a flowchart to represent a general ledger? A) #2 B) #1 C) #3 D) #5 Answer: A Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 13) Which symbol would be used in a flowchart to represent a manual process? A) #5 B) #6 C) #10 D) #11 Answer: B Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 14) Which symbol would be used in a flowchart to represent a connection to another part of the flowchart on the same page? A) #4 B) #13 C) #14 D) #15 Answer: C Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 15) Which symbol would be used in a flowchart to represent a connection to another part of the flowchart on a different page? A) #4 B) #13 C) #14 D) #15 Answer: D Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 16) Which symbol would be used in a flowchart to represent a file of paper documents? A) #7 B) #8 C) #9 D) #15 Answer: C Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 17) Which symbol would be used in a flowchart to represent a general ledger master file kept on magnetic disk? A) #2 B) #5 C) #7 D) #8 Answer: C Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 18) Which symbol would be used in a flowchart to represent employee time cards sent by department managers to the payroll department? A) #1 B) #4 C) #11 D) #16 Answer: A Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 19) Which symbol would be used in a flowchart to represent the display of a report on a computer screen? A) #1 B) #2 C) #3 D) #11 Answer: C Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 20) Which symbol would be used in a flowchart to represent the addition of information about a step represented in another symbol on the flowchart? A) #1 B) #5 C) #11 D) #15 Answer: C Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 21) Which symbol would be used in a flowchart to represent a payroll master file kept on magnetic tape? A) #4 B) #7 C) #8 D) #9 Answer: C Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 22) Which symbol would be used in a flowchart to represent a beginning, an ending, or a connection to another procedure? A) #9 B) #14 C) #15 D) #16 Answer: D Objective: Learning Objective 2 Difficulty: Moderate AACSB: Analytic 23) Which symbol would be used in a flowchart to represent a flow of data or documents? A) #12 B) #13 C) #14 D) #15 Answer: A Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 24) Which symbol would be used in a flowchart to represent a communication link? A) #12 B) #13 C) #14 D) #15 Answer: B Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 25) In a document flowchart of a manual payroll processing system, "update customer file" will be shown by a(n) ________ symbol, and "prepare vendor check" will be shown by a(n) ________ symbol. A) input; output B) input; manual operation C) manual operation; output D) manual operation; manual operation Answer: D Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 26) A flowchart that depicts the relationships among the input, processing, and output of an AIS is A) an internal control flowchart. B) a document flowchart. C) a system flowchart. D) a program flowchart. Answer: C Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 27) In a program flowchart, branching to alternative paths is represented by A) a terminal. B) data/information flow. C) computer operation. D) decision diamond. Answer: D Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 28) Nishant Kumar has been hired by American Manufacturing as a staff accountant in the internal audit department. He has been asked to thoroughly document the existing accounting information system in preparation for making recommendations for improvements to internal controls. He decides to begin with a description of the information stored in paper records, their sources, and their destinations. The documentation tool that he should employ for this purpose is a A) data flow diagram. B) document flowchart. C) system flowchart. D) program flowchart. Answer: B Objective: Learning Objective 2 Difficulty: Moderate AACSB: Reflective Thinking 29) Nishant Kumar has been hired by American Manufacturing as a staff accountant in the internal audit department. He has been asked to thoroughly document the existing accounting information system in preparation for making recommendations for improvements. He decides to begin by meeting with the information technology staff in order to develop an understanding of the computer programs used by the system. The documentation tool that he should employ for this purpose is a A) data flow diagram. B) document flowchart. C) system flowchart. D) program flowchart. Answer: D Objective: Learning Objective 2 Difficulty: Easy AACSB: Reflective Thinking 30) Nishant Kumar has been hired by American Manufacturing as a staff accountant in the internal audit department. He has been asked to thoroughly document the existing accounting information system in preparation for making recommendations for improvements. He decides to begin by meeting with the information technology staff in order to develop an understanding of the overall operation of the AIS, including data entry, storage, and output. The documentation tool that he should employ for this purpose is a A) data flow diagram. B) document flowchart. C) system flowchart. D) program flowchart. Answer: C Objective: Learning Objective 2 Difficulty: Moderate AACSB: Reflective Thinking 31) A materials requisition order document is prepared from the inventory file and the materials file, both of which are stored on a hard drive. Which one of the following diagrams represents this activity? A) B) C) D) Answer: D Objective: Learning Objective 2 Difficulty: Moderate AACSB: Reflective Thinking 32) A customer's check is returned for insufficient funds and the accounts receivable file, stored on a hard drive, is updated. Which one of the following diagrams represents this activity? A) B) C) D) Answer: C Objective: Learning Objective 2 Difficulty: Moderate AACSB: Reflective Thinking 33) A business simulation game that is used by colleges and universities all over the world has students submit decisions over the Internet. Decisions are stored online, processed on the server, and then the results are stored online. They are then downloaded by students in preparation for the next round. Which one of the following diagrams represents this activity? A) B) C) D) Answer: C Objective: Learning Objective 2 Difficulty: Moderate AACSB: Reflective Thinking 34) A report is generated from data stored on a hard drive. Which one of the following diagrams represents this activity? A) B) C) D) Answer: C Objective: Learning Objective 2 Difficulty: Moderate AACSB: Reflective Thinking 35) An employee receives a paycheck prepared in the payroll process. Which one of the following diagrams represents this activity? A) B) C) D) Answer: B Objective: Learning Objective 2 Difficulty: Moderate AACSB: Reflective Thinking 36) A student manually prepares a homework assignment and then turns it in to her teacher. Which one of the following diagrams represents this activity? A) B) C) D) Answer: A Objective: Learning Objective 2 Difficulty: Moderate AACSB: Reflective Thinking 37) Which of the following is not true about program flowcharts? A) Program flowcharts are a high-level overview of all business processes. B) Program flowcharts document the processing logic of computer programs. C) A program flowchart will exist for every computer process symbol on a system flowchart. D) Program flowcharts increase computer programmer productivity. Answer: A Objective: Learning Objective 2 Difficulty: Moderate AACSB: Reflective Thinking 38) Describe a system flowchart. Describe a program flowchart. How are the two interrelated? Answer: Systems flowcharts depict the relationships among the input, processing, and output of an AIS. The program flowchart illustrates the sequence of logical operations performed by a computer in executing a program. System flowcharts identify processing areas but do not show how the processing is done. The detailed logic used by the computer to perform the processing is shown on a separate program flowchart. Objective: Learning Objective 2 Difficulty: Moderate AACSB: Reflective Thinking 39) Identify five important guidelines for drawing a flowchart. Select one from your list and describe why it could be the most important one to consider when preparing a flowchart. Support your choice with an example. Answer: Use interviews, questionnaires, or narrative descriptions to understand the system before flowcharting it. Identify the different entities to be flowcharted such as departments, job functions, or external parties. Also identify documents and information flows along with the activities or processes performed on the data. Organize the flowchart using columns when several entities are involved in the process. Focus on the normal operations and include all relevant procedures and processes. Flowcharts should flow from top to bottom and from left to right. The origin and disposition of documents should be clearly identified by a clear beginning and end in the flowcharts. Use standard flowchart symbols. Multiple documents should be identified by numbers shown in the top right-hand corner of the document symbol. Documents do not directly connect with each other, except when moving from one column to another. Use on-page and off-page connectors to organize flowcharts. Use arrowheads to direct the flow of documents. Clearly label the pages, such as 1 of 3, 2 of 3, and 3 of 3. Documents or reports should be first shown in the column in which they originate and then moved to other columns. Use computer processing symbols to show movement of data in and out of the computer system. Filing operations can be directly shown with one line, no manual processing symbol required. Flowcharting is an iterative process. The first attempt should be a rough draft that is refined with each successive pass. Do not clutter flowcharts; redesign the flowchart as necessary. Review the flowchart for accuracy. On the final copy of the flowchart, the name of the flowchart, date, and the preparer's name should be shown. (Student answers will vary depending on the items chosen and the quality of their argument. The text provides various items that could be used to answer this question.) Objective: Learning Objective 2 Difficulty: Moderate AACSB: Analytic 40) Identify the mistake(s) in each flowchart segment. Answer: a. Figure a - the sort symbol should be a manual operation symbol. b. Figure b - the file update symbol should be a computer operation symbol, and the arrow from transaction file should flow into file update. c. Figure c - the arrows should point from left to right and a computer operation symbol is needed between the source data and the master file symbols. d. Figure d - the symbol for Endorsed should be a manual operation symbol, and endorsed checks are sent to the bank, so the file symbol should be replaced with a terminal symbol. Objective: Learning Objective 2 Difficulty: Difficult AACSB: Reflective Thinking Use the chart below to answer the following questions regarding flow chart symbols. 41) Which symbol would be used in a flowchart to represent the symbol for a file? A) #9 B) #5 C) #6 D) #11 Answer: A Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 42) Which symbol would be used in a flowchart to represent manually prepared control totals? A) #9 B) #8 C) #4 D) #7 Answer: C Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 43) Which symbol would be used in a flowchart to represent a customer sales order? A) #2 B) #1 C) #5 D) #15 Answer: B Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 44) Which symbol would be used in a flowchart to note that every sales order contains the customer name, address, product number, quantity ordered, item cost, and credit terms? A) #5 B) #8 C) #11 D) #16 Answer: C Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 45) Which symbol would be used in a flowchart to indicate a wireless connection between a laptop and the mainframe? A) #13 B) #12 C) #11 D) #14 Answer: A Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 46) Which symbol would be used in a flowchart to indicate flight information was displayed to customers via a large electronic screen in the airport terminal? A) #1 B) #2 C) #3 D) #4 Answer: C Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 47) Which symbol would be used in a flowchart to indicate the process started with the Human Resources department? A) #1 B) #10 C) #12 D) #16 Answer: D Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 48) Carly Jackson is a staff auditor for KPMG. She has been asked to document the client's existing accounting information system so the engagement team can assess the client's adequacy of controls around financial reporting. She decides to begin by creating a flowchart to describe, analyze, and evaluate internal controls. What documentation tool should she use for this purpose? A) internal control flowchart B) document flowchart C) system flowchart D) dataflow diagram Answer: A Objective: Learning Objective 2 Difficulty: Difficult AACSB: Reflective Thinking 49) Carly Jackson is a staff auditor for KPMG. She has been asked to document the client's existing accounting information system so the engagement team can assess the client's adequacy of controls around financial reporting. She decides to begin by examining the client's key software applications, examining a flowchart that illustrates the sequence of logical operations performed by the system in executing the application. To do this, Carly should ask the client for what type of flowchart? A) internal control flowchart B) document flowchart C) system flowchart D) program flowchart Answer: D Objective: Learning Objective 2 Difficulty: Difficult AACSB: Reflective Thinking 50) To create a good business process flowchart, one should emphasize ________ and put less emphasis on ________. A) meeting with top management; meeting with staff employees B) following rigid rules on how to prepare a business process flowchart; clearly communicating the activities involved in the process C) clearly communicating the activities involved in the process; following rigid rules on how to prepare a business process flowchart D) meeting with staff employees; meeting with top management Answer: C Objective: Learning Objective 2 Difficulty: Difficult AACSB: Reflective Thinking Accounting Information Systems, 13e (Romney/Steinbart) Chapter 5 Computer Fraud 5.1 Explain the threats faced by modern information systems. 1) Perhaps the most striking fact about natural disasters in relation to AIS controls is that A) many companies in one location can be seriously affected at one time by a disaster. B) losses are absolutely unpreventable. C) there are a large number of major disasters every year. D) disaster planning has largely been ignored in the literature. Answer: A Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 2) Which of the following is the greatest risk to information systems and causes the greatest dollar losses? A) human errors and omissions B) physical threats such as natural disasters C) dishonest employees D) fraud and embezzlement Answer: A Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 3) Identify the threat below that is not one of the four types of threats faced by accounting information systems. A) natural and political disasters B) software errors and equipment malfunctions C) unintentional acts D) system inefficiency Answer: D Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 4) A power outage is an example of a(n) ________ threat. A) natural and political disasters B) software errors and equipment malfunctions C) unintentional acts D) system inefficiency Answer: B Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 5) Excessive heat is an example of a(n) ________ threat. A) natural and political disasters B) software errors and equipment malfunctions C) unintentional acts D) system inefficiency Answer: A Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 6) What was the first known cyber-attack intended to harm a real-world physical target? A) Sasser B) Stuxnet C) Michelangelo D) Doomsday Answer: B Objective: Learning Objective 1 Difficulty: Difficult AACSB: Analytic 7) What agency did the United States create to use cyber weapons and to defend against cyber attacks? A) U.S. Cyber Command B) Department of Network Security C) Department of Cyber Defense D) Department of Technology Strategy Answer: A Objective: Learning Objective 1 Difficulty: Difficult AACSB: Analytic 8) Which type of threat causes the greatest dollar losses? A) software errors and equipment malfunctions B) unintentional acts C) intentional acts D) system inefficiency Answer: B Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 9) True or False: A disgruntled employee in Australia hacked into a sewage system, causing a quarter of a million gallons of raw sewage to flood a hotel and a park. Answer: TRUE Objective: Learning Objective 1 Difficulty: Easy AACSB: Analytic 10) True or False: A 16 year old hacker was able to access the systems of U.S. Missile Command and accidently launched a small nuclear missile, which fortunately, failed to detonate. Answer: FALSE Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 11) Logic errors are an example of which type of threat? A) natural and political disasters B) software errors and equipment malfunctions C) unintentional acts D) system inefficiency Answer: C Objective: Learning Objective 1 Difficulty: Moderate AACSB: Analytic 5.2 Define fraud and describe both the different types of fraud and the process one follows to perpetuate a fraud. 1) Seble wants to open a floral shop in a downtown business district. She doesn't have funds enough to purchase inventory and pay six months'' rent up front. Seble approaches a good friend, Zhou, to discuss the possibility of Zhou investing funds and becoming a 25% partner in the business. After a lengthy discussion Zhou agrees to invest. Eight months later, Zhou and Seble have a major argument. In order for Zhou to sue Seble for fraud, all the following must be true except A) Zhou's decision to invest was primarily based on Seble's assertion that she had prior floral retail experience. B) Seble told Zhou she had worked at a floral shop for several years, when in fact she did not have any prior experience in floral retail. C) before Zhou invested, Seble prepared a detailed business plan and sales forecasts, and provided Zhou with copies. D) Zhou's 25% share of the business is worth substantially less than her initial investment. Answer: C Objective: Learning Objective 2 Difficulty: Moderate AACSB: Reflective Thinking 2) Perpetrators do not typically A) attempt to return or pay back stolen amounts soon after the initial theft, but find they are unable to make full restitution. B) use trickery or lies to gain the confidence and trust of others at the organization they defraud. C) become bolder and more greedy the longer the theft remains undetected. D) begin to rely on stolen amounts as part of their income. Answer: A Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 3) "Cooking the books" is typically accomplished by all the following except A) overstating inventory. B) accelerating recognition of revenue. C) inflating accounts payable. D) delaying recording of expenses. Answer: C Objective: Learning Objective 2 Difficulty: Moderate AACSB: Analytic 4) SAS No. 99 requires that auditors A) plan audits based on an analysis of fraud risk. B) detect all material fraud. C) alert the Securities and Exchange Commission of any fraud detected. D) take all of the above actions. Answer: A Objective: Learning Objective 2 Difficulty: Difficult AACSB: Analytic 5) Intentional or reckless conduct that results in materially misleading financial statements is called A) financial fraud. B) misstatement fraud. C) fraudulent financial reporting. D) audit failure fraud. Answer: C Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 6) Which of the following is not an example of one of the basic types of fraud? A) While straightening the store at the end of the day, a shoe store employee finds and keeps an expensive pair of sunglasses left by a customer. B) An executive devised and implemented a plan to accelerate revenue recognition on a long-term contract, which will allow the company to forestall filing for bankruptcy. The executive does not own any stock, stock options or grants, and will not receive a bonus or perk because of the overstated revenue. C) A purchasing agent places a large order at higher-than-normal unit prices with a vendor that gave the agent tickets to several football games. D) A salesperson approves a large sales discount on an order from a company owned partially by the salesperson's sister. Answer: A Objective: Learning Objective 2 Difficulty: Moderate AACSB: Reflective Thinking 7) Describe two kinds of fraud. Answer: Misappropriation of assets, or theft, by a person or group for personal financial gain is usually committed by employees. Fraudulent financial reporting is intentional or reckless conduct that results in materially misleading financial statements. Objective: Learning Objective 2 Difficulty: Easy AACSB: Analytic 8) Explain the impact of SAS No. 99 on auditors' responsibilities. Answer: SAS No. 99, effective December 2002, requires that auditors explicitly consider fraud risks when planning and performing an audit. Auditors must understand types and characteristics of fraud. Audit teams must review clients' financial statements for areas susceptible to fraud and communicate with each other during planning of the audit. Auditors must ask management and audit committee members about any past or current instances of fraud. Since many frauds involve revenue recognition, auditors must exercise special care and testing in examining revenue accounts. Audit procedures and testing must be tailored in response to fraud risk assessment. Auditors must evaluate the risk of management override of controls and any other indications of fraud occurrences. All audit procedures, testing and findings must be documented and communicated to management and the audit committee. Auditors must evaluate and recognize the impact of technology on fraud risks, as well as opportunities technology may provide to design fraud-auditing procedures. Objective: Learning Objective 2 Difficulty: Moderate AACSB: Analytic 9) All of the following are required for an act to be legally classified as fraudulent except A) a falsehood is made. B) about a material fact. C) to inflict pain. D) resulting in a financial loss. Answer: C Objective: Learning Objective 2 Difficulty: Moderate AACSB: Analytic 10) Misappropriation of assets is a fraudulent act that involves A) dishonest conduct by those in power. B) misrepresenting facts to promote an investment. C) using computer technology to perpetrate. D) theft of company property. Answer: D Objective: Learning Objective 2 Difficulty: Moderate AACSB: Analytic 5.3 Discuss who perpetrates fraud and why it occurs, including the pressures, opportunities, and rationalizations that are present in most frauds. 1) Lapping is best described as the process of A) applying cash receipts to a different customer's account in an attempt to conceal previous thefts of cash receipts. B) inflating bank balances by transferring money among different bank accounts. C) stealing small amounts of cash, many times over a period of time. D) increasing expenses to conceal that an asset was stolen. Answer: A Objective: Learning Objective 3 Difficulty: Moderate AACSB: Reflective Thinking 2) Which of the following is not an example of the fraud triangle characteristic concerned with rationalization? A) revenge against the company B) intent to repay "borrowed" funds in the future C) sense of entitlement as compensation for receiving a lower than average raise D) belief that the company won't suffer because an insurance company will reimburse losses Answer: A Objective: Learning Objective 3 Difficulty: Moderate AACSB: Reflective Thinking 3) Insiders are frequently the ones who commit fraud because A) they are more dishonest than outsiders. B) they need money more than outsiders. C) they are less likely to get caught than outsiders. D) they know more about the system and its weaknesses than outsiders. Answer: D Objective: Learning Objective 3 Difficulty: Easy AACSB: Analytic 4) Which of the following is not a management characteristic that increases pressure to commit fraudulent financial reporting? A) close relationship with the current audit engagement partner and manager B) pay for performance incentives based on short-term performance measures C) high management and employee turnover D) highly optimistic earnings projections Answer: A Objective: Learning Objective 3 Difficulty: Easy AACSB: Analytic 5) Researchers have compared the psychological and demographic characteristics of white-collar criminals, violent criminals, and the general public. They found that A) few differences exist between white-collar criminals and the general public. B) white-collar criminals eventually become violent criminals. C) most white-collar criminals invest their illegal income rather than spend it. D) most white-collar criminals are older and not technologically proficient. Answer: A Objective: Learning Objective 3 Difficulty: Easy AACSB: Analytic 6) Identify the opportunity below that could enable an employee to commit fraud. A) An employee's spouse loses her job. B) An employee has a close association with suppliers or customers. C) An employee suddenly acquires lots of credit cards. D) An employee is upset that he was passed over for a promotion. Answer: B Objective: Learning Objective 3 Difficulty: Moderate AACSB: Analytic 7) Which of the following is a financial pressure that could cause an employee to commit fraud? A) a feeling of not being appreciated B) failing to receive a deserved promotion C) believing that their pay is too low relative to others around them D) having a spouse injured in a car accident and in the hospital for several weeks Answer: D Objective: Learning Objective 3 Difficulty: Moderate AACSB: Analytic 8) Which of the following fraudulent acts generally takes most time and effort? A) lapping accounts receivable B) selling stolen inventory to get cash C) stealing inventory from the warehouse D) creating false journal entries to overstate revenue Answer: A Objective: Learning Objective 3 Difficulty: Moderate AACSB: Reflective Thinking 9) In many cases of fraud, the ________ takes more time and effort than the ________. A) concealment; theft B) theft; concealment C) conversion; theft D) conversion; concealment Answer: A Objective: Learning Objective 3 Difficulty: Easy AACSB: Analytic 10) Which of the following is the best way to hide theft of assets? A) creating "cash" through the transfer of money between banks B) conversion of stolen assets into cash C) stealing cash from customer A and then using customer B's balance to pay customer A's accounts receivable D) charging the stolen asset to an expense account Answer: D Objective: Learning Objective 3 Difficulty: Moderate AACSB: Reflective Thinking 11) Which fraud scheme involves stealing customer receipts and applying subsequent customer cash payments to cover the theft? A) kiting B) laundering C) lapping D) bogus expense Answer: C Objective: Learning Objective 3 Difficulty: Easy AACSB: Analytic 12) One fraudulent scheme covers up a theft by creating cash through the transfer of money between banks. This is known as A) lapping. B) misappropriation of assets. C) kiting. D) concealment. Answer: C Objective: Learning Objective 3 Difficulty: Easy AACSB: Analytic 13) Which characteristic of the fraud triangle often stems from a lack of internal controls within an organization? A) pressure B) opportunity C) rationalization D) concealment Answer: B Objective: Learning Objective 3 Difficulty: Easy AACSB: Analytic 14) Which situation below makes it easy for someone to commit a fraud? A) placing excessive trust in key employees B) inadequate staffing within the organization C) unclear company policies D) All of the above situations make it easy for someone to commit a fraud. Answer: D Objective: Learning Objective 3 Difficulty: Easy AACSB: Analytic 15) What is the most prevalent opportunity within most companies to commit fraud? A) lack of any internal controls B) failure to enforce the internal controls C) loopholes in the design of internal controls D) management's failure to believe employees would commit fraud Answer: B Objective: Learning Objective 3 Difficulty: Moderate AACSB: Analytic 16) This component of the fraud triangle explains how perpetrators justify their (illegal) behavior. A) pressure B) rationalization C) concealment D) opportunity Answer: B Objective: Learning Objective 3 Difficulty: Easy AACSB: Analytic 17) The most efficient way to conceal asset misappropriation is to A) write-off a customer receivable as bad debt. B) alter monthly bank statements before reconciliation. C) alter monthly physical inventory counts to reconcile to perpetual inventory records. D) record phony payments to vendors. Answer: A Objective: Learning Objective 3 Difficulty: Moderate AACSB: Reflective Thinking 18) What are some of the distinguishing characteristics of fraud perpetrators? Answer: Some distinguishing characteristics of fraud perpetrators are: they tend to spend their illegal income to support their lifestyle; once they begin it becomes harder to stop and they become bolder as each incident happens; once they start to rely on the ill-gotten gains, they become more greedy and sometimes careless and overconfident. In the case of computer criminals, they are often young and have substantial computer knowledge. About two-thirds are men and likely to be an employee of the firm from which they steal. Many are unhappy or disgruntled with their employer because they feel unappreciated and underpaid. Most have no previous criminal record. Objective: Learning Objective 3 Difficulty: Moderate AACSB: Analytic 5.4 Define computer fraud and discuss the different computer fraud classifications. 1) Which of the following is least likely to result in computer fraud? A) releasing data to unauthorized users B) allowing computer users to test software upgrades C) allowing computer operators full access to the computer room D) storing backup tapes in a location where they can be quickly accessed Answer: C Objective: Learning Objective 4 Difficulty: Easy AACSB: Analytic 2) How does the U.S. Justice Department define computer fraud? A) as any crime in which a computer is used B) as any act in which cash is stolen using a computer C) as an illegal act in which a computer is an integral part of the crime D) as an illegal act in which knowledge of computer technology is essential Answer: D Objective: Learning Objective 4 Difficulty: Moderate AACSB: Analytic 3) Why is computer fraud often much more difficult to detect than other types of fraud? A) because massive fraud can be committed in only seconds, leaving little-to-no evidence B) because most perpetrators invest their illegal income rather than spend it, concealing key evidence C) because most computer criminals are older and more cunning than perpetrators of other types of fraud D) because perpetrators usually only steal very small amounts of money at a time, requiring a long period of time to pass before discovery Answer: A Objective: Learning Objective 4 Difficulty: Moderate AACSB: Analytic 4) Why is computer fraud often more difficult to detect than other types of fraud? A) Rarely is cash stolen in computer fraud. B) The fraud may leave little or no evidence it ever happened. C) Computers provide more opportunities for fraud. D) Computer fraud perpetrators are just more clever than other types of criminals. Answer: B Objective: Learning Objective 4 Difficulty: Easy AACSB: Analytic 5) Why do many fraud cases go unreported and unprosecuted? A) Major fraud is a public relations nightmare. B) Fraud is difficult, costly, and time-consuming to investigate and prosecute. C) Law enforcement and the courts are often so busy with violent crimes that little time is left for fraud cases. D) all of the above Answer: D Objective: Learning Objective 4 Difficulty: Easy AACSB: Analytic 6) The fraud that requires the least computer knowledge or skill involves A) altering or falsifying source data. B) unauthorized use of computers. C) tampering with or copying software. D) forging documents like paychecks. Answer: A Objective: Learning Objective 4 Difficulty: Moderate AACSB: Reflective Thinking 7) The simplest and most common way to commit a computer fraud is to A) alter computer input. B) alter computer output. C) modify the processing. D) corrupt the database. Answer: A Objective: Learning Objective 4 Difficulty: Easy AACSB: Analytic 8) Downloading a master list of customers and selling it to a competitor is an example of A) data fraud. B) output theft. C) download fraud. D) fraudulent financial reporting. Answer: A Objective: Learning Objective 4 Difficulty: Easy AACSB: Analytic 9) Why is computer fraud on the rise? Answer: Not everyone agrees on what constitutes computer fraud and some people may commit computer fraud unwittingly and not be aware of it. Many computer frauds go undetected. The belief that "it just can't happen to us." Most networks have a low level of security. Many Internet sites provide guidance on how to commit computer crimes. Law enforcement is unable to keep up with the number of computer frauds. Most frauds are not reported. The total dollar value of losses is difficult to calculate. Objective: Learning Objective 4 Difficulty: Moderate AACSB: Reflective Thinking 10) Why do fraudulent acts often go unreported and are therefore not prosecuted? Answer: Most fraud cases go unreported and are not prosecuted for several reasons. Many cases of computer fraud are as yet still undetected. As new technology and methods become available to organizations, prior undetected fraud may be revealed in the future. A second reason is that companies are reluctant to report computer fraud and illegal acts simply because of bad publicity—a highly visible case can undermine consumer confidence in an organization such as a financial institution. Also, the fact that a fraud has occurred may indeed encourage others to attempt to commit further acts against the organization. It would seem that unreported fraud creates a false sense of security, as people think systems are more secure than they are in reality. Another reason for not reporting fraudulent acts is the fact that the court system and law enforcement is busy with violent crimes and criminals in its system. There is little time left to go after a crime where no physical harm is present. Also, the court system tends to treat teen hacking and cracking as "acts of childhood" rather than as serious crimes—this leads to many plea bargains when a computer fraud is brought to trial. Another reason is that a computer fraud case is difficult, costly, and time-consuming to investigate and prosecute. Before 1986 no federal law existed governing computer fraud. Law enforcement officials, lawyers, and judges generally lack the computer skills necessary to properly evaluate, investigate, and prosecute computer crimes. Sadly, when all is said and done a successful prosecution and conviction of computer fraud results in a very light sentence. All of these factors contribute to the under reporting and