AIS test 1.txt

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  1. what is vertical flow distributions? what direction do they flow? and examples
    inflormation that flows downward from senior management to junior managers. examples include instructions, quotas and budgets
  2. two types of external users
    • 1) trading partners--exchanges include sales, billing, supplies
    • 2) stakeholders--entities with a direct interest in the organization
  3. elements of a system (4)
    • 1) more than one component
    • 2) must serve a common purpose
    • 3) system vs. subsystem
    • 4) serve at least one purpose
  4. what is an information system
    the set of formal procedures by which data are collected, procedded into information and distributed to users
  5. what is a transaction? what are the two types of transactions?
    • 1) a transaction is an event that affects or is of interest to the organization and is procedded by its information system as a unit of work
    • 2) types: financial and nonfinancial
  6. the three major subsystems of AIS
    • 1) transaction processing system (TPS)
    • 2) general ledger/ financial reporting system (GL/FRS)
    • 3) management reporting system (MRS)
  7. transaction processing system
    supports daily business operations with numerous reports, documents and messages
  8. gernal ledger/financial reporting system
    produces the traditional finanacial statements
  9. management reporting system
    • provides internal managemetn with special-purpose financial reports and information needed for decision making
    • i.e. budgets, variance reports and repsonsibility reports
  10. what is data
    are facts, whcih may or may not be processed and have no direct impact of the end user
  11. information
    causes the user to take an action that he or she otherwise could not, or would not, have taken. more simply, processed data
  12. steps in the AIS model
    • 1) data collection
    • 2) data processing<-->database management
    • 3) information generation
    • 4) feedback/external end users
  13. the three fundemental objectives common to all systems
    • 1) to support the stewardship of management
    • 2) to support management decision making
    • 3) the support the firms day-to-day operations
  14. turnkey systems
    are completely finisked and tested systems that are read for implementation. usually purchased
  15. backbone systems
    consist of a basic system stucture on which to build. the logic is preprogrammed and is tailored to suit the business
  16. vendor-supported systems
    are custom system the client organizations purchase commercially rather than develop in house
  17. materials management subfunctions (3)
    • 1) purchasing--ordering inventory
    • 2) receiving--accepting the inventory
    • 3) stores--takes custody of the inventory
  18. production function subfunctions
    • 1) production planning--scheduling
    • 2) quality control
    • 3) maitenance
  19. centralized data processing
    all data processing is performed by one ore more large computers housed at a central site that serves users throughout the organization
  20. distributed data processing (DDP)
    reorganizing the IT finction into small information processing units (IPU) that are distributed to end users and placed under their control
  21. DDP disadvantages
    • 1) loss of control
    • 2) inefficient use of resources
    • 3) destruction of audit trails
    • 4) increased potenial for errors, failures and the lack of standards
  22. DDP advantages
    • 1) cost savings
    • 2) increased user satisfaction
    • 3) operational efficiency
  23. the flat-file model (legacy systems)
    an environment in which individual data files are not related to other files. end users own their own data. involve large mainframe computers
  24. problems with the flat-file model
    • 1) data storage-multiply storage to share documents
    • 2) data updating-increased cost due to separate files
    • 3) currency of information-outdated info
  25. database model
    centralizes the organizations data into a common database that is shared by other users
  26. the REA model
    an accounting framework for modeling an organizations critical resources, events and agents (REA) and the relationships between them
  27. enterprise resource planning (ERP)
    • an information system model that enables an organization to automate and integrate its key business processes.
    • 1) allows data sharing, information flows, common business practices
  28. what are the 3 transaction cycles
    • 1) revenue
    • 2) expenditure
    • 3) conversion
  29. expenditure cycle (4 systems)
    • A) the acquisition of materials, property, and labor in exchange of cash
    • 1) accounts payable system
    • 2) cash disbursements system
    • 3) payroll system
    • 4) fixed asset system
  30. conversion cycle (2 subsystems)
    • a) raw materials to finsihed products
    • 1) production system-planning, scheduling, and control
    • 2) cost accounting system-monitors the flow of cost information related to production
  31. revenue cycle (2 subsystems)
    • A) processing cash sales, credit sales and the receipt of cash
    • 1) sales order processing-credits
    • 2) cash receipts
  32. source documents
    are used to capture and formalize transaction data that the transaction cycle needs for processing
  33. product documents
    are the result of transaction processing rather than the triggering mechanism for the process
  34. turnaround documents
    are product documents of one system that become source documents for another system
  35. 4 different types of files
    • 1) master file
    • 2) transaction file
    • 3) reference file
    • 4) archive file
  36. master file
    generally contains account data. updated from transactions
  37. transaction file
    is a temporary file of transaction records used to change or update data in a master file
  38. reference file
    stores data that are used as standards for processing transactions
  39. archive file
    contains records of past transactions that are retained for future reference
  40. data flow diagram (DFD)
    uses symbols to represent the entities, processes, data flows and data stores that pertain to a system
  41. entity relationship (ER) diagram
    is a documentation technique used to represent the relationship between entities
  42. system flowchart
    is the graphical representation of the physical relationships among key elements of a system
  43. batch
    is a group of similar transactions that are accumulated over time and then processed together
  44. advantages to batch processing
    • 1) improve operational efficiency
    • 2) provides control over the transaction process
  45. batch systems
    assemble transactions into groups for processing. there is always a time lag
  46. real-time systems
    process transactions individually at the moment the event occurs
  47. types of coding schemes
    • 1) sequential codes
    • 2) block codes
    • 3) group codes
    • 4) alphabetic codes
    • 5) alphanumeric codes
    • 6) mnemonic codes
  48. sequential codes
    • represent items in some sequential order
    • 1) advantages-gaps in numbers alerts management
    • 2) disadvantages-carry no info beyond the order
  49. block codes
    • is a variation on sequential coding that partly remedies. includes a chart of accounts
    • 1) advantages-insertion of new codes
    • 2) content not readily apparent
  50. group codes
    • used to represent complex items or events involving two or more pieces of related data
    • 1) advantages
    • a) facilitate the representation of large amounts of data
    • b) allow complex data structures to be represented in hierarchal form
    • c) detailed analysis
    • 2) disadvantages-over used
  51. alphabetic codes
    • can be the same as numeric codes
    • 1) advantages- capacity to represent large numbers of items increases dramatically
    • 2) disadvantages-difficulty rationaling the meaning
  52. mnemonic codes
    • alphabetic characters in the form of acronyms anf other combinations to convey meaning
    • 1) advantages-does not require the user to memorize meaning
    • 2) disadvantages-limited ability to represent items within a class
  53. justice
    the benefits of the decision should be distributed fairly to those who share the risks
  54. computer ethics
    the analysis of the nature and social impact of computer technology and hte corresponding formulation and justification of policies for the ethical use of such technology
  55. 3 levels of computer ethics
    • 1) pop
    • 2) para
    • 3) theoretical
  56. pop computer ethics
    simply the exposure to stories and reports found in the popular media regarding the good and bad of computer tech
  57. para computer ethics
    involves taking a real interest in computer ethics cases and acquiring some level of skill and knowledge in the field
  58. theoretical computer ethics
    apply the theories of philosophym sociaolog, and psychology to computer science with the goal of bringing some new understanding
  59. ehtical issues pertaining to computer technolgoy
    • 1) privacy
    • 2) security
    • 3) ownership of property
    • 4) equity in access
    • 5) environmental issues
    • 6) A.I.
    • 7) unemployment and displacement
  60. fraud
    denotes a false representation of a material fact made by one party with the intent to deceive and induce the other party to justifiably rely on the fact to his or her detriment
  61. fraud must meet 5 conditions
    • 1) flase representation
    • 2) material fact
    • 3) intent
    • 4) justifiable reliance
    • 5) injury or loss
  62. employee fraud and what are the 3 steps
    • generally designed to directly convert cash or other assets to the employees personal benefit
    • 1) steal something of value
    • 2) convert asset to cash (or other usable form)
    • 3) conceal the crime
  63. management fraud
    more insiduous than employee fraud because it often escapes detection until the organization has suffered irreparable damage
  64. special characteristics of management fraud
    • 1) perpetrated at levels of maangement above the one to which internal control structures relate
    • 2) involves using the financial statements to create an illusion
    • 3) if the fraud involves missapropriation of assets, it frequently is shrouded in a maze of complex business transactions
  65. the fraud triangle (3 factors")
    • 1) situational pressure-personal or job related stresses
    • 2) opportunity-direct access to assets and/or access to information that controls assets
    • 3) ethics-pertains to one's character and degree of moral opposition
  66. collusion and fraud
    when individuals in critical positions collude, they create opportunities to control or gain access to assets that otherwise would not exisit
  67. the underlying problems with the 2002 frauds
    • 1) lack of auditor independence
    • 2) lack of director independence
    • 3) questionable executive compensation schemes
    • 4) innapropriate accounting practices
  68. sarbanes-oxley acts reforms
    • 1) creation of the PCAOB
    • 2) auditor independence
    • 3) corporate governance and responsiblity
    • 4) issuer and management disclosure
    • 5) fraud and criminal penalties
  69. corruption
    involves an executive. manager or employee of the organization in collution with an outsider
  70. bribery
    giving, offering, soliciting, or receiving thing of value to influence an official in the performance of his or her lawful duties
  71. illegal gratuity
    giving, receiving, offering or soliciting something of value because of an official act that has been taken
  72. conflict of interest
    occurs when an employee acts on behalf of a third party during the discharge of his or her suties or has self interest in the activity being performed
  73. economic extortion
    is the use (or threat) of force (including economic sanctions) by an individual or organiation to obtain something of value
  74. skimming
    involves stealing cash from an organization before it is recorded on the organizations books and records
  75. mail room fraud
    an employee opening the mail steals a customers check and destroys the associated remittance advice
  76. cash larceny
    involes schemes in which cash receipts are stolen from an organization after they have been reocrded in the organizations books and records
  77. lapping
    the cash receipts clerk first steals and cashes a check from customer A, then uses customer B's check towards A to conceal
  78. billing schemes/vendor fraud
    perpratrated by employees who causes their employer to ussie a payment to a false supplier by submitting invoices for fictitious goods or services, inflated invoices or for personal purchases
  79. shell company fraud
    requires that the perpratrator establish a false supplier on the books of the victim company
  80. pass through fraud
    similiar to shell company fraud but a transaction actually takes place
  81. pay and return fraud
    involves a clerk with check writing authoriy who pays a vendor twice for the same products. the vendor then returns the check and the clerk intercepts
  82. check tampering
    involves forging or changing in some material way a check that the organization has written to a legitimiate payee
  83. payroll fraud
    the distribution of fraudulent paychecks to existent and/or nonexistent employees
  84. expense reimbursement fraud
    are schemes in which an employee makes a claim for reimbursement of ficticious or inflated business expenses
  85. internal control objectives (4)
    • 1) safeguard the assets of the firm
    • 2) ensure the accuracy and reliability of accounting records and info
    • 3) promote efficiency in the firms operations
    • 4) measure the compliance with managements prescribed policies and procedures
  86. reasonable assurance
    the internal control objectives are met in a cost effective way
  87. exposure
    absence or meakness of a control
  88. preventive-detective-corrective internal control model
    • 1) preventive controls-passive techniques that reduce fraud frequency
    • 2) detective controls-identify and expose undesired events
    • 3) corrective controls-reverse the effects of errors
  89. committee of soponsoring organizations of the treadway commission
    PCAOB and SEC endorsed the framework created by this committee
  90. an effective accounting information system will (4):
    • 1) identify and record all valid financial transactions
    • 2) provide timely information about transactions in sufficient detail to permit proper classification and financial reporting
    • 3) accuratley measure the financial vlaue of transactions so their effects can be recorded in financial statements
    • 4) accurately reocrd transactions in the time period in which they occured
  91. monitoring
    is the process by which the quality of internal control design and operation can be assessed
  92. control activities
    are the policies and procedures used to ensure that appropriate actions are taken to deal with the organizations identifed risks
  93. general controls
    pertain to entity-wide concerns such as controls over the data center, organization databases, system development and program maintenance
  94. application controls
    ensure the integrity of specific systems such as sales order processing, accounts payable and payroll applications
  95. transaction authorization
    ensure that all material transactions processed by the information system are valid and in accordance with managements objectives
  96. segregation of duties
    can take many forms, but segregates duties
  97. supervision
    • often called a compensating control
    • - used when there is a lack of segregation fo duties
  98. accounting records
    • - consist of source documents, journals and ledgers
    • - creates a stronger audit trail
  99. access controls
    ensure that only authorized personnel ahve access to the firms assets
  100. verification procedures
    • - are independent checks of the accounting system to identify errors and misrepresentations.
    • - takes place after the fact
Card Set
AIS test 1.txt
chapters 1-3: test 1
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