THE UNIVERSITY OF THE SOUTH PACIFIC

SCHOOL OF ACCOUNTING AND FINANCE

AF 121 – ACCOUNTING INFORMATION SYSTEMS

(Semester 1 / 2010)

(Laucala Campus)

FINAL EXAMINATION
(Time allowed: 3 hours + 10 min extra reading time)
(Weighting: 50% towards Coursework)
(Minimum 40% in Final Exam)

INSTRUCTIONS FOR CANDIDATES:

ƒ ANSWER ALL QUESTIONS IN THE ANSWER BOOKLET

ƒ ATTEMPT ALL QUESTIONS.
ƒ LABEL YOUR ANSWERS CLEARLY.

QUESTION DESCRIPTION MARK SUGGESTED

ALLOCATION TIME
1 Multiple Choice Questions 25 40 MINUTES
2 Theory Questions 35 60 MINUTES
3 Case Question 40 80 MINUTES

TOTAL 100 3 HOURS

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Question 1 Multiple Choice Questions (25 marks)
Circle the BEST answer for each of the following multiple-choice items. Each
multiple-choice question is each worth one (1) mark.

1. Which of the following is least likely to be part of an accounting information

system function?

A. Record the accounting data in the appropriate records

B. Generation of data to be part of the information system.
C. Process the detailed accounting data.
D. Report the summarized accounting data.

2. A prescribed sequence of work steps preformed in order to produce a

desired result for the organization is called a(n):

A. Accounting Information System.

B. Business Process.
C. Financial Transaction.
D. Capital Transaction Process.

3. An existing system within the organization that uses older technology is

called a(n):
A. Manual system
B. Legacy system
C. Client-server system
D. Modern integrated system

4. The choice of accounting information system will depend on all of the

following except:

A. The size of the organization

B. The philosophy of management
C. The ability of the company to capture information
D. The nature of its processes

5. A new technology that is used to authenticate users is one that plugs into
the USB port and eliminates the need for a card reader. This item is called
a:
A. Biometric reader
B. Smart card
C. USB smart key
D. Security token

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6. The reason that detailed data must be collected and stored is:
1. The data must be stored for future transactions or followup.
2. The data must be incorporated into the accounting system so that
regular financial statements can be prepared.
3. Management needs to examine and analyze data from transactions
to operate the organization.

A. Only 1.
B. Only 1 and 2.
C. Only 1, 2, and 3.
D. Include 1, 2, and 3 amoung other reasons.

7. Data redundancy occurs:

A. when shared databases are utilized.

B. when inventory has the same data in its files as sales has in its files.
C. when customer addresses are needed by both shipping and billing.
D. in all properly designed database management systems.

8. The internal control activity related to the adequate records and documents,
related to sales, includes which of the following?

A. Those responsible for recording sales should ensure that the

supporting documentation is retained and organized.
B. Information systems duties included in the revenue process includes
the preparation of sales orders and shipping logs.
C. All records are to be prepared by someone other than the person who
has custody of the assets.
D. The authorization process is to remain separate from the recording
process.

9. Whenever a company grants credit to customers, there is a danger that

customers will not pay. In fact, most companies have occasional problems
with customers who fail to pay which leads to writing off the accounts
receivable. Proper controls related to these uncollectible accounts include
all of the following, except:
A. Segregation of responsibilities so that no one has the opportunity to
write off an account to cover up stolen cash.
B. Thorough guidelines are to be established for determining the amount
of an allowance for uncollectible accounts.
C. An accounts receivable aging report should be generated to analyze all
customer balances and the lengths of time since payments were due.
D. Mathematical verification of the cash receipts journal and the accounts
receivable ledger.

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10. A computer software technique in which the computer software matches an
invoice to its related purchase order and receiving report is called a(n):

A. Three way matching

B. Document matching
C. Disbursement approval
D. Automated matching

11. An electronic payroll time keeping device that collects time and attendance
data when employees enter their time sheets is called:

A. Timekeeper
B. Paymaster
C. Electronic time clock
D. Badge readers

12. The term “ghost employee” means that:

A. Hours worked has been exaggerated by an employee.

B. False sales have been claimed to boost commission earned.
C. Overtime hours have been inflated.
D. Someone who does not work for the company receives a paycheck.

13. E-business:

1. is a narrower concept than e-commerce.

2. services the customers and the vendors.
3. is electronic recording and control of internal processes.
4. uses electronic means to enhance business processes.

A. 1 only.
B. 2 and 3 only.
C. 2, 3, and 4 only.
D. 1, 2, 3, and 4.

14. The ARPANET was:

A. restricted to universities, libraries, research organizations, and

commercial carrier access.
B. was designed in the 1990s to augment the growing Internet and
intranet systems.
C. does not require the use of protocols such as TCP/IP because of the
limited access.
D. restricted to universities, libraries, and research organizations.

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15. An example of a domain name is:
A. jhs-email.com.
B. cjb@jhs-email.com.
C. http://www.cjb.org.
D. All of the above, A, B, and C, are examples of domain names.

16. E-commerce sites may:

1. provide access to manufacturer information on the product.
2. may provide tax free sales of retail goods.
3. require shipping and handling fees to be paid.
4. provide links to live or video presentations of product information.
5. not provide as quick order processing as the company’s retail
locations.

A. 1, 2, 3, 4, and 5 are correct.

B. 1, 3, 4, and 5 are correct.
C. 1, 2, 4, and 5 are correct.
D. 1, 2, 3, and 4 are correct.

17. With the advent of technology, the Internet, and the WWW:

A. commerce is moving only from physical to electronic positioning.

B. commerce has maintained its stance of physical and electronic.
C. commerce is moving both from electronic to physical and from
physical to electronic.
D. No notable trends have been identified.

18. The Phar-Mor fraud began when management:

A. Forgot to change the budgeted figures that had been incorrectly

computed.
B. Attempted to make the actual net income match the budgeted
amounts.
C. Overstated their expenses to cover amounts embezzled.
D. Understated the revenue in order to reduce the tax payable.

19. Fraudsters typically try to justify their behavior by telling themselves that
they intend to repay the amount stolen or that they believe the
organization owes them the amount stolen. This justification is referred to
as:
A. Opportunity.
B. Rationalization.
C. Incentive.
D. Concealment.

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20. The theft of proprietary company information is called:

A. Vendor fraud.
B. Customer fraud.
C. Espionage.
D. Management fraud.

21. The study of the current system to determine the strengths and
weaknesses and the user needs of that system is called:

A. Systems Analysis
B. Systems Design
C. Systems Planning
D. Systems Implementation

22. A system conversion method in which the system is operated in only one or
a few sub-units of the organization.

A. Direct cutover conversion

B. Phase-in conversion
C. Pilot conversion
D. Parallel conversion

23. An IT governance committee has several responsibilities. Which of the

following is least likely to be a responsibility of the IT governance
committee?
A. Develop and maintain the database and ensure adequate controls over
the database.
B. Develop, monitor, and review security policies.
C. Oversee and prioritize changes to IT systems.
D. Align IT investments to business strategy.

24. MYOB stands for

A. Manage Your Own Business
B. Manipulate Your Own Business
C. Mind Your Own Business
D. Make Your Own Business

25. MYOB Accounting is suitable for

A. Small scale businesses only.

B. Small to medium scale businesses.
C. Medium to large scale businesses.
D. Large scale businesses only.

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_______________________________________________________________
Question 2 Theory Questions (35 marks)
1. The ‘Total Service Station’ is a petrol station and convenience store
(Bonjour) similar to any BP or Mobil service and convenience stores. Total
Service Station is a regional chain of service station and convenience marts
located in Fiji with many locations.

Based on the 5 work steps and processes in the accounting information

system, briefly describe your impression of how these 5 work steps would be
accomplished at Total Service Station if you fill petrol, buy a bottled soft drink
and a candy bar. [5 marks]

2. Why do you think there have been so many business failures among “dot-
com” companies that were devoted only to retail e-commerce such as
buying and selling on the Internet? [5 marks]

3. How can Internet technologies be involved in improving processes in

business functions like accounting information systems? Also evaluate the
business value of accounting information systems. [5 marks]

4. What is the role of a database management system in an accounting

information system? How have the Internet, intranet, extranets, and the
World Wide Web affected the types and uses of data resources available
to business professionals? [5 marks]

5. Describe the 3 components of the fraud triangle and how each would relate
to defraud businesses. [5 marks]

6. Define the following terms:

i) management fraud [1 mark]

ii) employee fraud [1 mark]
iii) vendor fraud [1 mark]
iv) customer fraud [1 mark]
v) computer fraud [1 mark]

7. The following are the selected MYOB screens. Identify the action used in
these MYOB accounting screens and explain the procedure as to how you
will enter the required information on these screens. [5 marks]

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Screen 1

Screen 2

Screen 3

Screen 4

Screen 5

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_______________________________________________________________
Question 3 Mini Case Questions (40 marks)
Part A (10 marks)

Katrina is a university student. Each Monday through Friday, she commutes to

her classes at the university of the south pacific. Each semester, Katrina pays for
on-campus medical privileges. Before Wednesday of the week prior to each new
semester, Katrina writes a cheque to USP finance for $150. She writes her
student identification number on the cheques memo line and then mails the
cheque to the finance cashier.

Upon receipt of student cheques, the finance cashier issues a current semester
medical decal and a receipt of payment received. These items are mailed to each
student at the address noted on the cheque. A daily listing of cheque received is
prepared and filed by date. A photocopy of the cheque is made and placed in a
file organized by the student’s last name. Accordingly, each student has a
medical file maintained in the medical centre. These cheques are endorsed and
deposited in the bank on a daily basis. Once each month, the finance manager
reconciles the bank statement.

Required:

Prepare a process map presenting the university’s medical processes.

[10 marks]

Part B (10 marks)

Jackie Chan is an accounting software consultant at Ching Pong Chang &

Associates Consulting. Ching Pong is a value-added reseller of accounting
software for mid-size companies, which normally have revenue between $50-500
million. One of Jackie’s responsibilities is to solicit new client companies and to
meet with their management to recommend the best accounting software system
for them. Midmarket accounting software typically offers several modules that the
client may choose from. For example, not all client would need an e-business
module for their accounting software.

Required:

Since part of Jackie’s compensation is a percentage of software sales and

consulting revenue that he generates, what are the ethical conflicts he faces
when soliciting new clients and recommending software and software modules?
[10 marks]

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Part C (10 marks)

Balancing books Ltd. runs 4 private colleges which provide education and
training for people in the bookkeeping industry. Its 2-year course includes training
in debits and credits and accounting information systems. The tangible fixed
assets of each college are recorded in an asset register which is maintained at
each college location by each college manager. The system operates as
described below:

1. In order to obtain new assets, a purchase requisition form is completed

and approved by the manager at each college.

2. The requisition is sent to head office, where the purchasing officer checks
the requisition for approval and completes a purchase order for the new
asset.

3. Assets costing more than $5000 are approved by the financial accountant.
All assets over $20000 require board approval.

4. The purchase order is then sent to the supplier and a copy is sent to the
central store at the head office location.

5. The asset is received by the central store where the receiving clerk checks
that all the asset details agree with those on the receiving report and the
copy of the purchase order. The receiving clerk then issues the asset with
its computer-generated sequential barcode number. This barcode is fixed
to the asset and written on the receiving report and the supplier invoice.

6. The relevant college manager inputs the new asset details into the asset
register using a copy of the purchase order, the original requisition and the
asset’s barcode.

7. The asset manager is maintained on FAST – tailored fixed assets

computer system – and reconciled to the general ledger by each college
manager monthly.

8. The FAST system calculates depreciation automatically each month using

the rate input by the college manager at the time the asset was added to
the register.

Required:

From the case above, identify 5 internal control strengths in accounting systems.
[10 marks]

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Part D (10 marks)

3 Idiots, Inc. is a small company with 3 people working in the expenditure

processes. One of the 3 employees is the supervisor of the other two. Some
tasks that must be accomplished within the expenditure processes are the
following:

a. Accounts payable record keeping.

b. Authorization of new vendors
c. Authorization of purchase returns.
d. Authorization of purchases.
e. Cash disbursements record keeping.
f. Cheque-signing authority.
g. Custody of inventory in the receiving area.
h. Maintaining custody of cash.
i. Preparation of a debit memo for a purchase return.

Required:

Consider the duties you would assign to each of the 3 employees (supervisor’s
name ‘Michael’; employee 1’s name ‘Mitchell’; and employee 2’s name ‘Kristine’).
No employee should have more than 3 tasks and there should be a proper
separation of duties to achieve appropriate internal control. List the 3 people, the
duties you assigned to each, and a description of why those assignments should
achieve proper separation of duties.
[10 marks]

THE END

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