Directions: Select the letter of the best answer.

1. A prospective client may request the CPA/MS practitioner to handle a systems engagement,
which may include
a. Development of an accounting system for a newly established organization.
b. Total revision of the present accounting system.
c. Extension of the present accounting system to cover new business activities of an
existing organization.
d. All of the above.
2. An information system that is concerned primarily with the flow of monetary information in the
organization is called
a. Financial information system
b. Personnel information system
c. Logistics information system
d. Accounting information system
3. Which of the following statements about Management Information System (MIS) is correct?
a. It is a sub-system of the broad accounting information system.
b. It is designed to provide information to both internal and external users.
c. It is for internal decision-makers only.
d. It must be a computer-based system.
4. Accounting systems are designed to attain some objectives. Which of the following cannot be
considered an objective of accounting systems?
a. To provide a means by which interested parties may be given information on the
financial position and results of operations of a business organization.
b. To protect the business owners and safeguard their assets.
c. To facilitate management planning, control and decision-making.
d. To accomplish the different routinary administrative activities of the business
organization.
5. Following are among the essential components of a typical accounting system, except
a. Quality control
b. Journals and ledgers
c. Business papers and forms
d. Chart of accounts
6. Some examples of business forms commonly used by a typical business organization are the
following, except
a. Sales invoice
b. Purchase order
c. Financial statements
d. Official receipt
7. It is a pictorial presentation of the flow of work and/or documents through a department or an
entire organization
a. Organizational chart
b. Chart of accounts
c. Flow chart
d. PERT diagram
 8. It shows a logical diagram of the flow of data through all parts of the data processing system
a. Program flow chart
b. Systems flow chart
c. Document flow chart
d. Logical flow chart
9. In this data processing method, the data are converted into machine-readable form and then
processed through electronic impulses.
a. Manual data processing
b. Mechanical data processing
c. Electro-mechanical data processing
d. Electronic data processing
10. Which of the following statements is correct?
a. Printed forms, books of accounts, reports and financial statements, routine clerical
operations machines, and equipment make up the accounting system.
b. The information requirement s of executive management are the same with those of
middle managers, who are required to make more immediate operational decisions.
c. Not all data is information, and information to one manager may e simply data to
another.
d. When the input data are converted into machine-readable forma and processed
through electronic impulses, this method is known as mechanical data processing.
11. In a computer-based system, who evaluates the existing application system and designs new
data processing procedures?
a. Computer operator
b. EDP manager
c. Systems analyst
d. Programmer
12. A type of electronic data processing wherein data are processed immediately after a transaction
is made to update current information is called
a. Random-access processing
b. Batch processing
c. Online processing
d. Off-line processing
13. Which of the following statements is false?
a. Documentation is not as essential in accounting systems engagement as it is in an audit
engagement.
b. Sales order processing and billing are examples of accounting sub-systems.
c. The preparation of a chart of accounts is one of the first steps in the development of an
accounting system.
d. One of the essential elements of an accounting system is the bookkeeping system or
pro-forma entries, including computational requirements.
14. It is a type of electronic data processing wherein the collected data are processed at regular
intervals (weekly, monthly, etc.) to update existing information.
a. Online processing
b. Batch processing
 c. Real time processing
d. Electronic funds transfer system
15. Which of the following is not a correct description of a Decision Support System (DSS)?
a. A DSS is an interactive system that is useful in solving semi-structured and unstructured
problems, i. e., those requiring a top- or middle-management decision-maker to
exercise judgment and to control the process.
b. A DSS automates a decision or provides structured information flows.
c. A DSS provides tools for an end-user to employ in applying insight and judgment.
d. A DSS must be interactive to permit the user to explore the problem by using its
computational capacities, models, assumptions, data resources, and display graphics.
16. Electronic Data Interchange (EDI) is the electronic transfer of documents between businesses. It
allows for the computer-to-computer exchange of transaction documents, such as purchase
orders, invoices, and shipping documents.
For instance, if a company would shift from manual purchase order system to EDI system, and
that the cycle time for manual purchase order is:
i. Preparation 3 days
ii. Mailing 3 days
iii. Processing at the suppliers 10 days
iv. Delivery 5 days
v. Cycle time 21 days

The shortest possible cycle time if the company fully implemented the EDI system would be

a. 18 days
b. 5 days
c. 15 days
d. 16 days
17. Which of the following refers to “systems design”?
a. It is the process of monitoring, evaluating, and modifying a system.
b. It is the process of learning how the current system functions, determining the needs of
users, and developing the logical requirements of a proposed system.
c. It is the process of developing specifications for hardware, software, manpower, data
resources, and information products required to develop a system.
d. It determines the technical, operational, and economic feasibility of a system.
18. Which of the following statements about internal control is incorrect?
a. The primary responsibility for establishing and maintaining internal control rests with
the MAS consultant.
b. The cost of internal control should not exceed its benefits.
c. Internal control is intended to provide reasonable assurance that the entity’s objectives
are achieved.
d. External auditors must consider internal control, but they do not establish and maintain
it.
19. Consider the following statements. Identify whether the statements are true or false.
Statement 1 – EDP systems are less flexible than manual systems.
 Statement 2 – In general, it is desirable that only one employee should have sole control over
the record keeping and physical handling of the transactions assigned to him.
Statement 3 – The growing use of EDP hardware has virtually eliminated the need for internal
accounting controls.

Statement 1 Statement 2 Statement 3

a. True True True
b. True False True
c. False True False
d. False False False
20. The basic principles of accounting information system include all the following, except
a. Flexible structure
b. Cost awareness
c. Implementation
d. Useful output
21. It is a control system that anticipates potential variations from plans so that adjustments can be
made to prevent problems either before they occur or before they become too serious.
a. Feedback control system
b. Feed forward control systems
c. Preventive control system
d. Internal control system
22. Which of the following is an example of feed forward control system?
a. Calculation of variances in a standard cost accounting system
b. Cash budgeting
c. Separation of duties
d. Organizational independence
23. It refers to the practice of hiring an outside company to handle all or part of its data processing.
a. Consultancy
b. Outsourcing
c. Technology transfer
d. Make-or-buy analysis
24. Which one of the following is not considered a typical risk of outsourcing?
a. Less availability of expertise
b. Inflexibility of the relationship
c. Vulnerability of important decision
d. Dependency on a single vendor
25. Systems feasibility studies should include an evaluation of systems alternatives. Once the
decision-makers have determined that two or more systems alternatives are acceptable, which
analysis tool should be used to select the best systems alternative?
a. Decision tree analysis
b. Cost-benefit analysis
c. Variance analysis
d. Cost-volume-profit analysis