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AC 304 Exam review
| Question | Answer |
|---|---|
| Comprehensive process of ID'ing, categorizing, prioritizing and responsing to an organization's risks | enterprise risk management |
| Used by upper level mgmt to model data, perform simulations and sensitivity analyses | decision support systems |
| Batch processing is most appropriate when accounts and transactions need to be recorded/updated immediately true or false | false |
| Order the activities in batch processing from first to last | business event occurs transaction file created and updated transactions are scheduled to be processed account balances/databases are updated |
| Software for analyzing, configuring, optimizing or maintaining a computer | utility |
| Which of the following is NOT a category of internal risk | physical |
| Order the four steps in enterprise risk management from first to last | Risk Identification Risk Categorization Risk Prioritization Risk Response |
| Classification of controls based on location include all except general automated physical application | automated |
| Significant control that ensures no single employee has end-to-end custody/control of a transaction | segregation of duties |
| Inherent limitations of a system of internal controls | cost vs benefit management override collusion human judgment human error |
| Objectives stipulated in COSO's Internal Control Framework | compliance reporting operations |
| Subsytem of IS that collects, processes, and reports information related to the financial aspects of business events. | Accounting Information System |
| The two fundamental characteristics of useful information | relevance faithful representation |
| Relevant information has | materiality confirmatory value predictive value |
| Faithfully represented information is | error free complete neutral |
| Enhancing characteristics of useful information include | understandability verifiability timeliness comparability |
| type of risk matrix that uses colors to highligt areas if concern; provides holistic view of risk | heat map |
| An organization decides to increase insurance coverage on its sales delivery truck fleet | transfer |
| Information represents the measurements of observations of objects and events. | false |
| Functional components of an information system: Pick all that apply | input storage output processing |
| Three primary types of business processes | Acquisition and Payments conversion Marketing, Sales & Collections |
| Type of risk that is native to a business process or activity if nothing is done | inherent |
| Segregation of duties separate which of the following incompatible functions? | recording authoriszing custody |
| Controls can be classified based on which of the following: | function/intention implmentation location |
| Data | is facts or figures in their raw form. Represents the measurements of observations of objects and events. Lacks the context |
| Information | is data presented in a form that it useful in decision making ( gives context to Data) |
| Information system | consist of interrelated parts (hardware, software, databases, and networks) |
| Accounting information system | is very similar to an Information system except for the fact that it primarily fcoues on the accounting and financial side |
| Relevance | Predicitive value Confirmatory value materiality |
| Faithful representation | Complete Neutral Error free |
| Designer: | application of accounting principles, auditing principles, IS techniques, and systems development methods to design an AIS |
| User: | accounts perform various functions within organizations that use the AIS. |
| Objective elavualtor: | provide audit and assurance services |
| Consultant: | advise clients on business processes. IT security and controls, acquisition / design/ implementation/ maintenance of AIS |
| Provider of Accounting and tax service: | compilation and tax service provider |
| Enterprise risk management | is the comprehensive process of identifying, categorizing, prioritizing , and respond to a company's risks |
| Different ways of responding to risk: | Accept Mitigate Transfer Avoid |
| Accept - | when the company decides to assume the risk (assumption) |
| Mitigate- | reduced is another way to describe this and is when a company tries to compress a problem |
| Transfer- | also known as sharing when the risk is shared among multiple parties |
| Avoid- | when a company choose to not deal with the risk |
| Internal control | is a process that specially mitigates risks to the company’s financial information |
| What are the three control characteristics | Function Location Implementation |
| Function: | Preventive- prohibits or deters a risk outcome from occurring Detective- identifies a risk outcome during or after it has occured Corrective- remidies the outcome after a risk outcome has occurred |
| Location: | Physical- governs human activities IT General-governs entire IT environment IT application- governs a specific application |
| Implementation: | Manual- it is done by a human Automated- it is done by a computer |
| What are the three categories of segregation of duties | Authoriszing Recording Custody |
| Authorzising- | busienss trancations and decisions |
| Recording- | data about business activitie |
| Custody- | oversee assets |
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