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ACTG 474 STUDY GUIDE
Data - Answers - Raw facts collected, recorded, and stored (numbers, dates, names). Information - Answers - Data organized into a meaningful context so it becomes useful (example: a sales invoice, not just numbers). Decision quality - Answers - How good a decision is; useful information improves it, but too much information can reduce it. Information overload - Answers - When too much information overwhelms decision makers and lowers decision quality. Information technology (IT) - Answers - Technology used to collect, store, process, and deliver information for decisions. Value of information - Answers - Net benefit of information: benefits from better decisions minus the costs to gather, maintain, and store data. Relevant (useful info) - Answers - Information that directly relates to the decision (no unnecessary noise). Reliable (useful info) - Answers - Information that is dependable and free from bias. Complete (useful info) - Answers - Information that includes all important aspects; it does not leave out key facts. Timely (useful info) - Answers - Information that arrives in time to be used for the decision. Understandable (useful info) - Answers - Information presented clearly so users interpret it correctly. Verifiable (useful info) - Answers - Independent people can check the data and reach the same conclusion. Accessible (useful info) - Answers - Information is available to authorized users when needed. Business process - Answers - A coordinated set of related activities performed by people and/or machines to achieve an organizational goal.
Transaction - Answers - An agreement/event between two entities to exchange goods, services, or other measurable economic events. Transaction processing - Answers - Capturing and processing transaction data so it can produce accounting outputs (records, statements). Give-get exchange - Answers - Basic pattern of many business processes: the organization gives something and receives something in return. Revenue cycle - Answers - Provide goods/services and receive cash (or a promise of cash). Expenditure cycle - Answers - Acquire goods/services and pay cash (or commit to pay). Production (conversion) cycle - Answers - Turn inputs (labor + raw materials) into finished goods. Payroll (HR/payroll) cycle - Answers - Pay cash to employees in exchange for labor. Financing cycle - Answers - Obtain or repay capital (cash) such as loans, investments, and dividends—cash in/cash out decisions. Accounting Information System (AIS) - Answers - A system that collects, records, stores, and processes data to produce information for decision makers; includes people, processes, technology, and controls. Corporate strategy (AIS link) - Answers - The organization's overall goal/approach; it determines what information the AIS must provide to measure progress. Value chain - Answers - All internal activities that add value for customers; includes primary activities and support activities. Primary activities - Answers - Activities that directly create value for customers (e.g., operations, sales). Support activities - Answers - Activities that help primary activities run efficiently (e.g., HR, IT, procurement). Supply chain - Answers - The broader network that includes the company plus suppliers, distributors, and customers. Data processing cycle - Answers - Steps that transform transaction data into outputs: input, storage, processing, and output. Data input - Answers - Capturing transaction data, checking accuracy/completeness, and ensuring approvals/policies are followed.
Batch processing - Answers - Process transactions in groups at scheduled times (e.g., end of day posting). Real-time (online) processing - Answers - Process transactions immediately as they occur. Document (output) - Answers - An output record of a transaction, such as an invoice or receipt. Output record - Answers - An output record of a transaction, such as an invoice or receipt. Report - Answers - A formatted summary output, such as a monthly sales report. Query - Answers - A targeted question to retrieve specific information from the database. ERP system - Answers - Enterprise Resource Planning: integrates major business processes and shares data across the organization. ERP advantage: single view - Answers - ERP provides an enterprise-wide view of data, streamlining information flow across departments. ERP advantage: enter once - Answers - ERP captures data once and reuses it, reducing duplicate entry and inconsistencies. ERP advantage: standardization - Answers - ERP standardizes procedures and reports, improving consistency and control. ERP disadvantage: cost/time - Answers - ERP can be costly and take significant time to implement. ERP disadvantage: complexity/resistance - Answers - ERP can be complex and may face user resistance during adoption. Systems documentation - Answers - Written or diagram documentation that explains how a system works for users, managers, and auditors. Narrative description - Answers - A text-based (written) explanation of a system or process. Data Flow Diagram (DFD) - Answers - Diagram focusing on data movement: external entities, processes, data stores, and data flows. External entity (DFD) - Answers - A person/organization outside the system that sends data to or receives data from the system.
Process (DFD) - Answers - An activity that transforms data (named with action verbs like validate, update, prepare). Data store (DFD) - Answers - Where data is kept (files, databases, ledgers). Data flow (DFD) - Answers - Movement of data between entities, processes, and stores. Context diagram - Answers - Highest-level DFD showing the system as one process and the data flows to/from external entities. Flowchart - Answers - Diagram showing inputs/outputs, processing steps, storage, flows, and decision points; good for showing controls and manual vs automated steps. Document flowchart - Answers - Shows how documents and data move through a process; often used to evaluate internal controls. System flowchart - Answers - Shows how a process is handled in the system, including the data processing cycle. Program flowchart - Answers - Shows the logical steps a program follows (sequence of logic). Business Process Diagram (BPD/BPMN) - Answers - Diagram using standard symbols to show activities in a business process and often who performs each step. Threat / event - Answers - A potential adverse occurrence or unwanted event that could harm the AIS or the organization. Exposure / impact - Answers - Potential dollar loss if a threat becomes real. Likelihood - Answers - Probability that a threat will occur. Internal controls - Answers - Policies and procedures that provide reasonable assurance objectives are met (safeguard assets, reliable records, compliance, efficiency). Preventive control - Answers - Stops problems before they happen (deters errors/fraud). Detective control - Answers - Finds problems that were not prevented. Corrective control - Answers - Fixes problems and helps recover after detection. FCPA - Answers - Foreign Corrupt Practices Act: aims to prevent bribery of foreign officials and requires internal accounting controls for public corporations.
Authorization - Answers - Approval of transactions/activities to ensure they are valid and appropriate. Segregation of duties - Answers - Split responsibilities so no one person controls authorization, custody, and recording—reduces fraud/errors. Segregation of systems duties - Answers - Divide IT responsibilities among roles (admins, security, programmers, operators, etc.) to reduce misuse and errors. Safeguarding assets - Answers - Protect assets, records, and data from theft, misuse, or loss (physical and digital). Independent checks - Answers - Reconciliations/reviews by someone independent of the original process to catch errors/fraud. Monitoring - Answers - Ongoing evaluation of controls (audits, supervision, system activity monitoring, fraud hotline, etc.).
