REVIEWER ON CHAPTERS 6, 7, & 8 – QUESTIONS

A. CHAPTER 6 – PAYROLL PROCEDURES

1. Payroll processing is considered a special case purchase system because

a. labor is purchased instead of raw materials for production or finished goods for
resale.
b. payroll processing applies to all employees regardless of the nature of job or mode of
compensation.
c. payroll activities constitute a relatively steady stream of transactions.
d. all of the above.

Answer – a
b is incorrect since payroll processing depends on the status of the employee if the
employee receives compensation on a periodic basis such as monthly or bi-monthly in
case of salaries, hourly, piece of work or commission-based; in addition, there are
employee deductions and withholding taxes;
c is incorrect since bulk, if not all, of the payroll activities specifically preparation of
employee pay checks are done at the end of the period (end of the week, end of two
weeks, and of the month); preparing a large number of payroll checks in addition to
the normal trade account checks can overload the general purchasing and cash
disbursement system;
d is incorrect since b and c are incorrect.

2. Which of the following documents is the basis of the entry - debit to WIP and credit
to wages payable?
a. AP summary from the AP department
b. Labor distribution summary from the Cost Accounting department
c. Disbursement voucher from the AP department
d. Journal voucher from the Cash Disbursement department

Answer – b
a is incorrect since AP summary from the AP department is the document used by the
GL department to reconcile with the JV from the Cash Disbursement for the entry of
cash disbursement for accounts payable for inventories purchased;
c and d are incorrect since these are the documents pertaining to the entry of cash
disbursement for wages payable, specifically the cash disbursement voucher (per
discussion of the author in our textbook).

3. Which of the following documents identifies employees authorized to receive a

paycheck and is used to reflect changes in pay rates, payroll deductions, and job
classification?
a. Work orders
b. Time cards
c. Job tickets
d. Personnel action forms

Answer- d
a is incorrect since a work order (or production order) is a document that draws from
bills of materials and route sheets to specify the materials and production (machining,
assembly, etc) for each batch;
b is incorrect since time cards are tool to capture the time the employee is at work for
payroll calculations;
c is incorrect since job tickets are mechanisms to capture the time that individual
workers spend on each production job and are used by cost accounting to allocate
charges to WIP.

4. T/F: After performing the payroll activities, the payroll department files time cards,
personnel action forms, payroll register copy, and employee payroll records.

Answer – false
All of the documents are filed by the payroll department except the employee payroll
records. It is not strictly filed because it is not a transaction file/document but a master
file/document which is updated with employee details particularly the pay rate, total
hours worked to date and total compensation to date.

5. T/F: In processing checks and disbursements with regard to payroll, the AP

department prepares the cash disbursement voucher while the Cash Disbursement
department funds the payroll imprest account by preparing and depositing a single
check for the entire amount of the payroll, sends a copy of the check to AP, and
prepares and sends journal voucher to the GL function.

Answer – true

6. T/F: The general ledger function receives the labor distribution summary from cost
accounting, the disbursement voucher from accounts payable, and the journal
voucher from cash disbursements.

Answer – true

7. Which the following departments updates the WIP SL?

a. Inventory Control
b. Cost Accounting
c. Payroll
d. Cash Disbursement

Answer – b
a is incorrect since Inventory Control updates the RM and FG SL;
c is incorrect since Payroll updates the employee payroll records;
d is incorrect since Cash Disbursement updates the check register.

8. Which of the following departments authorizes the payment to fund the payroll
imprest account?
a. Production department
b. Payroll Department
c. AP department
d. Cash Disbursement department
Answer – c
a is incorrect since Production department, specifically production supervisors,
authorizes and reviews time charges (time cards) of employees;
b is incorrect since Payroll department processes payroll data and employee pay checks;
d is incorrect since Cash Disbursement department prepares the cash disbursement for
the single check to fund the payroll imprest account.

9. In the integrated payroll and HRM system (advanced technology) flowchart, which
department is still shown and exists because clerical tasks are still done in that
department and are not done by the data processing department?
a. GL department
b. Production department
c. Accounts Payable department
d. Cash Disbursements department

Answer – b; although it is not physically shown in the flowchart, the production

department still exists since it provides the job tickets to the Cost Accounting
department and the employees from the production department encode their time
charges into the HRM system;
a, c, d are incorrect since the clerical tasks done by these departments in the basic
technology payroll procedures are now transferred and done by the data processing
department; the tasks of these departments now are to access the transaction or master
files created or updated by the automated systems, print the relevant documents or
reports and review them.

10. In the advanced technology payroll system, which activity is done in batch?
a. Recording changes in employee status and other details
b. Entering of job cost data
c. Entering time keeping data
d. Calculation of payroll and creation of online payroll register

Answer – d;
a, b, c are incorrect because all of these activities are done in real-time.

11. Which of the following statements is most correct with regard to the risk of
inaccurately recording transactions in the payroll process?
a. Risks may pertain to incorrectly calculated time and attendance data, unrecorded
or incorrectly recorded Wages Payable, and inaccurate postings.
b. Having time cards, job tickets and disbursements pertain to access controls.
c. Supervisor verifies payroll register accuracy while the AP clerk verifies time cards
and attendance.
d. Implementing missing data checks, numeric-alphabetic data tests, tests for invalid
data values and check digits pertain to error messages and file back-up.

Answer – a;
b is incorrect since the control pertains to accounting records not access controls;
c is incorrect since the supervisor checks the time cards while the AP clerk checks the
payroll register;
d is incorrect because the data checks pertain to data input edits and not error messages
and file back-up.

12. Which of the following statements is most incorrect with regard to the risk of
misappropriation of cash through payroll fraud?
a. Risks may pertain paying nonexistent employee by submitting fictitious timecards
or the overpayment of employee.
b. Personnel action form helps payroll keep employee records current.
c. Timekeeping and personnel functions should be separated and because payroll has
both asset custody (paychecks) and record-keeping responsibility (employee payroll
records), the AP should be responsible for reviewing payroll register and approving
payment.
d. The production supervisor or payroll supervisor should distribute checks to
authorize the employee paycheck and help verify the existence of employees.

Answer – d; An independent paymaster (ideally a clerk or supervisor in the treasury

department) should distribute the paychecks since giving the responsibility to the
production supervisor or any employee from the payroll department may open the
opportunity to perpetrate payroll fraud.
a, b, c are incorrect since all of these statements are true and the one asked is the
false statement.

13. Which of the following is a motive for unauthorized access to payroll records and
confidential employee data?
a. Attempts to perpetrate a payroll fraud
b. Theft of confidential information such as Social Security Numbers, pay rates and
other personal data
c. Malicious acts such as corrupting or deleting payroll data
d. All of the above

Answer – d

14. Which of the following is not a characteristic of outsourcing the payroll function?
a. Payroll tasks are transferred to the third party provider, thus giving access to these
providers on sensitive internal information.
b. It is only the client firm itself, and not the employees, who can submit time data to
service providers.
c. An advantage is the cost savings on the costs of payroll including continuing
education and training of payroll staff.
d. Disadvantages include confidentiality issues because outside organization will have
access to confidential employee information and firm’s financial resources and poor
internal controls of the service provider because these may allow material errors or
fraud.

Answer – b; client firm or employees themselves can submit time data to service
providers;
a, c, d are incorrect since all of these statements are characteristics of outsourcing the
payroll function.
B. CHAPTER 6 – FIXED ASSETS PROCEDURES

1. All of the following are specific objectives of the fixed asset system EXCEPT:
a. process the acquisition of fixed assets as needed and in accordance with formal
management approval and procedures.
b. maintain accurate depreciation records for depreciable assets in accordance with
acceptable methods.
c. provide management with information to help plan for past and present fixed asset
investments.
d. properly record the retirement and disposal of fixed assets.
Answer – c; it should be for future fixed assets investments, not past and present.
a, b, d are incorrect since all of these are objectives of the fixed asset system.

2. Having a depreciation schedule used to initiate depreciation calculations is related

to one of the main activities in the fixed assets procedures pertaining to
a. asset acquisition.
b. asset maintenance.
c. asset disposal.
d. none of the above.
Answer – b

3. Which of the following is a distinction between general expenditure procedures (for

inventory) and fixed assets procedures?
a. Authorizing the purchase through the preparation of the purchase requisition by
the requesting department
b. Receiving of goods or fixed assets by the receiving department
c. Transferring of goods to the warehouse and fixed assets to the user department(s)
d. Processing of accounts payable and cash disbursement

Answer – c; In the general expenditure procedures (for the purchase of inventory), the
goods are transferred to the central warehouse while for the fixed assets procedures,
the fixed assets are transferred to the respective user departments who ordered the
fixed assets;

a, b, d are incorrect since all of these activities are similar for both the general
expenditure procedures and fixed asset procedures.

4. T/F: Another distinction between the general expenditure procedures (for inventory)
and fixed assets procedures is that the Inventory Control department performs
record keeping for the general expenditure procedures while the Fixed Asset
Accounting department performs record keeping for the fixed assets procedures.

Answer – true
5. T/F: The disposal report formally authorizes the disposal of the actual fixed assets
while the approved disposal request form formally authorizes the fixed asset
department to remove from the ledger an asset disposed of by the user department.

Answer – false; it is the other way around. The disposal request form coming from the
user department, after undergoing the proper approval procedures, authorizes the
disposal of the actual asset while the disposal report formally authorizes the fixed asset
department to remove from the ledger assets disposed of by the user department.

6. The journal vouchers prepared by which department contains the entries pertaining
to the deprecation expense and/or disposal of fixed assets?
a. Inventory Control
b. Fixed Assets
c. Accounts Payable
d. Cash Disbursement

Answer – b
a is incorrect since Inventory Control is not involved in the fixed asset procedures;
c is incorrect since the AP department records the debit to the fixed asset and credit to
the payable for the fixed assets, although this is not specifically mentioned by the
author in our text book, this is derived in in relation to the task of AP department
in the general expenditure procedures,
d is incorrect since the Cash Disbursement department records the debit to the payable
for the fixed assets and credit to cash.

7. T/F: In the asset maintenance procedures of the computer-based fixed assets

system, the fixed assets file is also involved and updated because the accumulated
depreciation and the book values of the fixed assets, which are contained in the
fixed assets file, are affected by the depreciation expense.

Answer – true

8. Which of the following documents provide evidence that the firm has physically
received the asset and shows its cost?
a. Receiving Report
b. Cash Disbursement Voucher
c. Both a and b
d. None of the above

Answer – c; receiving report shows that the fixed asset has been physically received
while the cash disbursement voucher shows the cost.

9. T/F: The fixed asset status report, which contains the cost, the accumulated
depreciation (if any), and the residual value for each of the firm’s fixed assets, is the
 basis of the fixed asset system (FAS) in preparing the depreciation schedule for each
asset when its acquisition is originally recorded.
Answer – true

10. In the asset maintenance procedures of the computer-based fixed asset system
(FAS), which of the following is most incorrect about the tasks performed by the
FAS?
a. FAS automatically calculates current period’s depreciation.
b. FAS automatically updates accumulated depreciation and book-value fields in the
subsidiary records.
c. The FAS records losses or gains, if any.
d. FAS automatically posts total depreciation to the affected GL accounts;

Answer – c; this task is performed by the FAS for the disposal procedures, not for the
maintenance procedures;
a, b, d are incorrect because these tasks are performed by FAS pertaining to the
maintenance procedures.

11. The last part of the maintenance procedures in a computer-based fixed asset system
is the preparation of the fixed asset status report (containing the specific fixed
assets, methods of depreciation used, depreciation expense per each asset and the
.total depreciation expense for posting in the GL) which is sent to the fixed asset
department for review.

Answer – false; the document is the fixed asset depreciation report not the fixed asset
status report; the fixed asset status report is a report prepared in the acquisition
procedures, not in the maintenance procedures, which contains details such as the cost
of the specific asset, the accumulated depreciation, if any, and the residual value.

12. Which of the following statements about fixed asset controls is most correct?
a. On authorization controls, fixed asset acquisitions should be formal but may be
implicitly authorized and that written request and independent approval should be
done for both low and high-value items.
b. On supervision controls, an important element is the physical security of fixed
assets and to ensure that these fixed assets are used in accordance with
organizational policies that they are not taken home for personal use unless
authorized.
c. On independent verification controls, periodically, the internal auditor should
review the asset acquisition and approval procedures to determine the
reasonableness of factors used in such decisions and that there is physical
verification on the location, condition, but not necessarily the fair value of fixed
asset against the fixed asset records in the subsidiary ledger;
d. All of the above statements are equally correct.

Answer – b
a is incorrect because there should be explicit authorization and that written request
and independent approval should be required for high-valued items and not necessarily
for low valued items; this depends on the company’s policy and for operational flexibility;
c is incorrect because fair value should also be verified and checked against the fixed
assets records in the subsidiary ledger.

C. CHAPTER 7 – CONVERSION CYCLE

1. Which of the following statements about the conversion cycle is most correct?
a. Inputs to the conversion cycle may come from the marketing system thru sales
forecast or from the revenue cycle thru sales order.
b. Conversion cycle provides input to the expenditure cycle in the form of purchase
requisitions for the payroll activities and labor usage for the general expenditure
activities.
c. In general, conversion cycle provides inputs to the GL/FR Systems pertaining to
the RM, WIP and FG inventories.
d. All of the above statements are equally correct.

Answer – a
b is incorrect since purchase requisitions are for the general expenditure activities while
the labor usage is for payroll activities;
c is incorrect since in generally, conversion cycle does not provide RM inventory details
to the GL/FR system. RM inventory details are provided by the expenditure cycle.
Although an exception to this, as described by the author of our textbook in the
succeeding parts, that RM inventory may be involved for standard materials requisition,
additional requisition for short of RM, or excess RM to be returned to the storehouse;
d is incorrect since b and c are incorrect statements.

2. Which of the following is a formal plan and authorization to begin production?

a. Production schedule
b. Route sheet
c. Work order
d. Move ticket

Answer – a
b is incorrect since a route sheet is a document that shows the production path a
particular batch of products follows during manufacturing;
c is incorrect since a work order is a document that draws from bills of materials and
route sheets to specify the materials and production (machining, assembly, etc) for each
batch; it initiates the manufacturing process in the production departments;
d is incorrect since a move ticket is a document that records work done in each work
center and authorizes the movement of the job or batch from one work center to the
next.

3. The bill of materials and route sheets are input to which activity?
a. Planning and controlling production
b. Performing production operations
 c. Maintaining inventory control
d. Performing cost accounting

Answer – a
b is incorrect because inputs to performing production operations include production
schedule, work order, move ticket, material requisition;
c is incorrect because inputs to maintaining inventory control include purchase
requisition, materials requisition, and completed work orders;
d is incorrect because inputs to performing cost accounting include cost standards,
work orders, material requisition, job time cards and move tickets

4. T/F: The conversion cycle consists of two sub-procedures – the production activities
and the cost accounting activities.

Answer – true

5. Which document is used if there are materials needed in excess of standard

quantities?
a. Materials requisition
b. Excess materials requisition
c. Materials return ticket
d. None of the above

Answer – b
a is incorrect since materials requisition is used for standard quantities;
c is incorrect since materials return ticket is used if there is excess RM or RM left
because the materials needed are lesser than the standard quantities;
d is incorrect since b is the correct answer.

6. Which department performs the assessment of inventory requirements and

preparation of the production control documents?
a. Production Planning and Control
b. Work Centers
c. Inventory Control
d. Cost Accounting

Answer – a
b is incorrect since work centers initiate production activities upon receipt of control
documents, prepare time keeping documents, and distribute documents to users;
c is incorrect since inventory control updates RM and FG inventory records or SLs;
d is incorrect since cost accounting updates WIP records or SL and calculates variances.

7. Work orders, move tickets and material requisitions are controls pertaining to
a. transaction authorization.
 b. segregation of duties.
c. supervision.
d. independent verification.

Answer – a
b is incorrect since segregation of duties pertains to separation of custody and recording
(RM and FG custody vs inventory control and work centers vs. cost accounting) and
separation of tasks so that fraud requires collusion (separate GL from other accounting
functions);
c is incorrect since supervision pertains to overseeing of RM usage and timekeeping;
d is incorrect since independent verification is done by the cost accounting department
(reconciles info/docs from production planning, work centers and inventory control) and
by the GL department (JVs from inventory control and cost accounting).

8. T/F: In the information systems that support lean manufacturing, materials

requirements planning (MRP) integrates product manufacturing, product
engineering, sales order processing, customer billing, human resources, and related
accounting functions.

Answer – false; the system described in the statement is the manufacturing resource
planning (MRP II) system;
Materials requirements planning (MRP) systems are systems used to plan inventory
requirements in response to production work orders to ensure that adequate raw
materials are available to the production process;
Enterprise resource planning (ERP) systems are systems assembled of prefabricated
software components; ERPs integrate the use of electronic data interchange or EDI
which is an intercompany exchange of computer-processable business information in
standard format; while MRP II focuses on manufacturing firms, ERPs also sell and fit to
non-manufacturing firms.

D. CHAPTER 8 – FINANCIAL REPORTING AND MANAGEMENT REPORTING SYSTEMS

1. T/F: Information flows from the GLS to FRS but not from FRS to GLS.

Answer – false; information flows from GLS to FRS pertaining to transactions coming
from the TPS thru the special journals and subsidiary ledgers and recorded in the GLS
thru JVs; these information are used in preparing for the unadjusted trial balance;
Information flows from the FRS to the GLS pertaining to adjusting and closing entries.

2. Which of the following sub-systems connected to the GLS appears to all the main
TPSs (revenue, expenditure and conversion cycle systems)?
a. Billing system
b. Cost accounting system
c. Cash disbursement system
d. Inventory control system
Answer – d;
a is incorrect since this only pertains to the revenue cycle system;
b is incorrect since this only pertains to the conversion cycle system;
c is incorrect since this only pertains to the expenditure cycle system;

3. A GLS database file which contains financial data by responsibility centers for MRS
reporting refers to
a. general ledger master file.
b. journal voucher file.
c. responsibility center file.
d. budget master file.

Answer – c;
a is incorrect since general ledger master file is the principal file in the GLS database
and is based on the chart of accounts;
b is incorrect since the journal voucher file provides a record of all GL transactions and
replaces the traditional general journal;
d is incorrect since the budget master file contains budget data by responsibility center.

4. Which of the following statements about the FRS is most correct?

a. The law dictates management’s responsibility for providing stewardship
information to external parties.
b. Much of the information provided takes the form of standard financial
statements, tax returns, and documents required by regulatory agencies such as
the Securities and Exchange Commission (SEC).
c. The primary recipients of financial statement information are external users,
such as stockholders, creditors, and government agencies.
d. All of the above statements are equally correct.

Answer – d

5. T/F: Sophisticated users are users of financial reports who understand the
conventions and accounting principles that are applied and that the statements
have information content that is useful.

Answer – true

6. Which of the following master files serves as the last part of audit trail in the TPS
after which journal vouchers are prepared so that entries will be posted in the
general ledger thru the GLS?
a. Special Journals
b. Subsidiary Ledgers
c. Both a and b
d. None of the above
Answer – c

7. In the financial reporting procedures, which step immediately precedes the

preparing of the financial statements?
a. Preparing the adjusted trial balance
b. Journalizing and posting the closing entries
c. Capturing the transaction
d. Preparing the post-closing trial balance

Answer – a
b is incorrect since this step immediately follows the preparing of the financial
statements;
c is incorrect since this step is the first step in the financial reporting procedures;
d is incorrect since this step is the last step in the financial reporting procedures.

8. In the real-time general ledger and financial reporting system, journal vouchers
a. serve as the authorization file before entries are posted in the GL.
b. serve as the audit trail file after entries are directly posted in the GL.
c. both a and b.
d. None of the above.

Answer – b;
a is incorrect since this set-up pertains to the traditional and/or batch GL systems in
which journal vouchers are needed before entries can be made in the GL;
c and d are incorrect since b is the correct answer.

9. T/F: XBRL (extensible Business Reporting Language) is an XML (extensible Markup

Language)-based language that was designed to provide the financial community
with a standardized method for preparing, publishing, and automatically
exchanging financial information, including financial statements of publicly held
companies.
Answer – true;

10. T/F: In general, end user computers can display and process both HTML and XML
documents.

Answer – false; End user computers cannot process HTML and can only display this
format

11. Classification schemes that are compliant with the XBRLsSpecifications to

accomplish a specific information exchange or reporting objective such as filing with
the Securities and Exchange Commission pertain to
a. XBRL Taxonomy
b. XBRL Tags
c. XBRL Instance Documents
 d. None of the above

Answer – a;
b is incorrect since XBRL Tags are XBRL Taxonomy elements used to cross-reference
with each GL accounts and are used whenever data is disseminated to outsiders;
c is incorrect since XBRL Instance Documents pertain to the actual financial
statements;
d in incorrect since a is the correct answer.

12. T/F: In May 2008, the SEC began a voluntary financial reporting program that
allows registrants to supplement their required filings with exhibits using XBRL.

Answer – false; It should be in April 2005; May 2008 is the time when the SEC issued
rules requiring large publicly held companies to adopt XBRL by December 15 to meet
financial reporting requirements.

13. Which of the following statements about control issues in GLS/FRS is most
incorrect?
a. Journal vouchers must be authorized by a manager at the source department.
b. GL clerks should not have record-keeping responsibility for special journals or
subsidiary ledgers but may prepare journal vouchers or have custody of physical
assets.
c. Audit trails should be detailed enough to answer inquiries, reconstruct data if
destroyed, meet government requirements, prevent, detect and correct errors and
provide historical data.
d. IT application controls that apply to TPS also apply to GL/FRS.

Answer – b; GL clerks should also not prepare journal vouchers nor have custody of
physical assets;
a, c, and d are incorrect since all of these statements are correct.

14. T/F: Management reporting is often called non-discretionary reporting because it is

mandated, as is financial reporting, and that Sarbanes-Oxley requires an effective
MRS.

Answer – false; Management reporting is discretionary since it is not mandated unlike

financial reporting but can argue that SOX requires an effective MRS.

15. T/F: The formalization of tasks is the subdivision of organizational areas into tasks
that represent full-time job positions the purpose of which is to avoid an
organizational structure that depends on specific individuals.
Answer – true;
16. T/F: Authority refers to an individual’s obligation to achieve desired results. while
responsibiliy is the right to make decisions pertaining to areas of responsibility.

Answer – false; it’s the other way around;

17. T/F: Managers with narrow spans of control (less people under him) need more
detailed reports while more summarized information are needed by managers with
broad spans of control (more people under him).

Answer – true;

18. Tactical planning and management control are concerns of:

a. top management.
b. middle management.
c. operations management.
d. operations staff and personnel

Answer – b;
a is incorrect since top management is concerned about strategic planning;
c is incorrect since operations management is concerned about operational control;
d is incorrect since operations staff and personnel is concerned about the day-to-day
activities or operations.

19. Which of the following are techniques used to motivate managers in all functional
areas to use resources as productively as possible?
a. Strategic planning decisions
b. Tactical planning decisions
c. Management control decisions
d. Operational control decisions

Answer – c;
a is incorrect since strategic planning decision is planning with a long-term time frame
that is associated with a high degree of uncertainty;
b is incorrect since tactical planning decision is the planning performed by the middle-
level manager to achieve the strategic plans of the organization;
d is incorrect since operational control decision is a technique that ensures that the firm
operates in accordance with pre-established criteria.

20. T/F: The more the problem is unstructured, the more strategic management level is
involved, the more the traditional system is useful.

Answer – false; the more the problem is unstructured, the more useful is the
nontraditional information system and the less useful the traditional system since
traditional systems deal most effectively with fully structure problems; unstructured
problems are normally complex and unique making traditional data processing
techniques ineffective.

21. Which of the following elements of the problem structure pertains the values used
to represent relevant factors?
 a. Data
b. Procedures
c. Objectives
d. None of the above

Answer – a;
b is incorrect since procedures pertain to the sequence of steps used in solving the
problem;
c is incorrect since objectives pertain to results decision maker desires to attain;
d is incorrect since a is the correct answer.

22. Reports triggered by events, not time are known as

a. programmed reports.
b. scheduled reports.
c. on-demand reports.
d. financial reports.

Answer – c;
a is incorrect since programmed reports provide information to solve problems that
users have anticipated;
b is incorrect since scheduled reports are reports produced according to an established
time frame (produced at specified intervals);
d is incorrect since financial reports are example of scheduled reports.

23. A report which is useful to decision making is known as

a. relevant report.
b. summarized report.
c. accurate report.
d. timely report.

Answer – a
b is incorrect since summarization pertains to appropriateness in the level of detail;
c is incorrect since accuracy pertains to being free of material errors;
d is incorrect since timeliness pertains to being in time for decisions.

24. Which of the following statements about responsibility accounting is most correct?
a. Responsibility accounting is the concept that every economic event affecting the
organization is the responsibility of and can be traced to an individual manager.
b. The budget is a process that helps management achieve their financial objectives
by establishing measurable goals for each organizational segment.
c. Responsibility reports are reports containing performance measures at each
operational segment in the firm, which flow upward to senior levels of
management.
d. All of the above statements are equally correct.
Answer – d

25. T/F: The top down flow of information pertains to budget information while the
bottom-up flow of information refers to the performance information.

Answer - true

26. Which of the following is a responsibility center unit that has the objective of
maximizing the return on investment assets including product development and
other investment decisions?
a. Revenue Center
b. Cost Center
c. Profit Center
d. Investment Center

Answer – d;
a is incorrect since a revenue center is an organizational unit with responsibility for
revenue generation;
b is incorrect since a cost center an organizational unit with responsibility for cost
management within budgetary limits;
c is incorrect since a profit center is an organizational unit with responsibility for both
cost control and revenue generation.

27. T/F: An appropriate measure of management performance is the one which includes
both controllable and non-controllable costs.

Answer – false; Only controllable costs should be included as part of management

performance measure since it will be unfair and inappropriate to charge management
for costs that it cannot influence or control such as allocated centralized costs.

28. Which behavioral control concept pertains to the merging of goals within the
organization?
a. Goal congruence
b. Information overload
c. Inappropriate performance measures
d. None of the above.

Answer – a;
b is incorrect since information overload occurs when a manager receives more
information than can be assimilated;
c is incorrect since inappropriate performance measures is when behavior and
performance measures are inconsistent with the objectives of the firm; performance
measures should consider all relevant aspects of a manager’s responsibility – both
financial and nonfinancial;
d is incorrect since a is the correct answer.
29. T/F: Big data analytics is characterized and defined by the three Vs: extreme
volumes of data, the rapid velocity at which the data must be processed, and the
wide variety of structured and unstructured data types that need to be integrated.

Answer - true

30. In small data analytics, a drill-down technique to either verify or reject a user’s
hypothesis is known as
a. Data warehouse.
b. Data mining.
c. Verification model.
d. Discovery model.

Answer – c
a is incorrect since data warehouse is a database constructed for quick searching,
retrieval, ad hoc queries, and ease of us;
b is incorrect since data mining is the process of selecting, exploring, and modeling large
amounts of data to uncover relationships and global patterns that exist in large
databases but are hidden among the vast amount of facts;
d is incorrect since the discovery model uses data mining to discover previously
unknown but important information that is hidden within the data.

31. In big data analytics, volume refers to

a. the big data, and refers to terabytes, petabytes, and even exabytes of data.
b. the speed at which big data must be analyzed.
c. the primary driver of volume.
d. none of the above.

Answer – a;
b is incorrect since it pertains to velocity;
c is incorrect since it pertains to variety;
d is incorrect since a is the correct answer.

32. In big data reporting systems, predictive analytics

a. is a mathematical process that describes real-world events and the relationships
between factors responsible for them.
b. views past performance to determine why something happened the way it did.
c. encompasses a variety of statistical techniques that draw upon current and past
data to calculate the statistical likelihood of future scenarios occurring.
d. tells the user what actions should be taken in response to specific questions.

Answer – c;
a is incorrect since it refers to descriptive analytics;
b is incorrect since it refers to diagnostic analytics;
d is incorrect since it refers to prescriptive analytics.
33. Outsourcing controls address which of the following risks?
a. Risk from hackers or employees of third party service provider
b. Risk of failure to perform by the third party service provider
c. Risk if losing strategic advantage
d. All of the above

Answer – d