Deck 7: Rea Modeling

Question 1

A journal entry in a view-driven AIS debits equipment for $10,000, credits cash for $2,000 and credits notes payable for $8,000.Which of the following pieces of data would you expect to see in an event-driven AIS but not in the view-driven AIS?

A)The transaction date
B)The expected life of the equipment
C)Both the transaction date and the expected life of the equipment
D)Neither the transaction date nor the expected life of the equipment

Answer 1

B

Question 2

Data in a view-driven AIS are often stored in multiple places, such as:

A)Journals.
B)Ledgers.
C)Both journals and ledgers.
D)Neither journals nor ledgers.

Answer 2

C

Question 3

Which of the following pieces of data would you expect to find in an event-driven AIS, but not in a view-driven AIS?

A)Accounts to debit
B)Accounts to credit
C)Details about customer preferences for product color
D)All of these

Answer 3

C

Question 4

A company wants to prepare a schedule of assets that separates current and long-term assets, as well as reports relevant dollar amounts.Which type of AIS could the company use to prepare such a schedule?

A)View-driven
B)Event-driven
C)Either view-driven or event-driven
D)Neither view-driven nor event-driven

Question 5

View-driven accounting information systems often foster the idea of stovepiping in organizations.Which of the following is an example of stovepiping?

A)All department heads meet to discuss company strategy.
B)A sales representative quotes a price that is less than cost.
C)Both all department heads meet to discuss company strategy and a sales representative quotes a price that is less than cost are examples of stovepiping.
D)Neither all department heads meet to discuss company strategy nor a sales representative quotes a price that is less than cost is an example of stovepiping.

Question 6

An accounting information system captures data that are eventually grouped by account, and then used to prepare general purpose financial statements.The system could be described as:

A)A view-driven AIS.
B)An event-driven AIS.
C)Either a view-driven AIS or an event-driven AIS.
D)Neither a view-driven AIS nor an event-driven AIS.

Question 7

In view-driven accounting information systems, internal controls are often:

A)Protective.
B)Expensive.
C)Both protective and expensive.
D)Neither protective nor expensive.

Question 8

Information technology controls, such as a password rotation policy, can be used in:

A)View-driven AIS.
B)Event-driven AIS.
C)Both view-driven AIS and event-driven AIS.
D)Neither view-driven AIS nor event-driven AIS.

Question 9

Consider the following REA diagram as you respond to the question: The box in the second column represents a(n):

A)Resource
B)Event
C)Internal agent
D)External agent

Question 10

The accounting cycle comprises ten steps.In which step would you expect to find a difference between view-driven and event-driven AIS?

A)Analyze transactions.
B)Record adjusting entries.
C)Both analyze transactions and record adjusting entries.
D)Neither analyze transactions nor record adjusting entries.

Question 11

In a view-driven AIS, where you would expect to see stored data about product quality?

A)In the journal
B)In the ledger
C)Both in the journal and in the ledger
D)Neither in the journal nor in the ledger

Question 12

Which of the following statements about view- and event-driven AIS is most true?

A)The two are differentiated by the presence or absence of information technology.
B)The two are differentiated by the use of paper or electronic documents.
C)Both the two are differentiated by the presence or absence of information technology and the two are differentiated by the use of paper or electronic documents are true.
D)Neither the two are differentiated by the presence or absence of information technology nor the two are differentiated by the use of paper or electronic documents is true.

Question 13

Consider the following REA diagram as you respond to the question: The numbers and symbols in parentheses in the model are called:

A)Cardinalities
B)Database construction tools
C)Internal controls
D)Relationship descriptors

Question 14

In contrast with view-driven AIS, event-driven accounting information systems focus on:

A)Business processes.
B)Journal entries.
C)Ledger accounts.
D)All of these.

Question 15

View-driven AIS have been criticized because their data are often outdated.Which of the following journal entries for the purchase of inventory best illustrates that criticism?

A)Debit purchases, credit cash
B)Debit inventory, credit cash
C)Debit purchases, credit inventory
D)Debit inventory, credit purchases

Question 16

Consider the following REA diagram as you respond to the question: The boxes in the third column represent a(n):

A)Resource and internal agent
B)Event and internal agent
C)Internal agent and external agent
D)Resource and external agent

Question 17

View-driven AIS are designed to support a particular way of looking at the data they contain.Which of the following is not a view commonly supported by a view-driven AIS?

A)Balance sheet
B)Income statement
C)Statement of shareholders' equity
D)Budget variance report

Question 18

View-driven accounting information systems have been criticized because they:

A)Focus on a very small, well-defined group of important business events.
B)Often process data in batches.
C)Both focus on a very small, well-defined group of important business events and often process data in batches
D)Neither focus on a very small, well-defined group of important business events nor often process data in batches

Question 19

Data in a view-driven accounting information system are:

A)Highly aggregated.
B)Stored in a single place.
C)Both highly aggregated and stored in a single place
D)Neither highly aggregated nor stored in a single place

Question 20

Consider the following REA diagram as you respond to the question: The box in the first column represents a(n):

A)Resource
B)Event
C)Internal agent
D)External agent

Question 21

Enforcing ___ tells a database to update a junction table whenever separate tables are updated.

A)Internal control
B)Referential integrity
C)The accounting cycle
D)Expectancy theory

Question 22

Consider the following short case as you respond to the next nine questions: ABC Consulting's employees include management, consultants and office staff.The company accepts engagements related to internal control design and evaluation, as well as enterprise risk management plans.A customer can purchase the two services independently of one another.The office staff bills clients on a monthly basis with terms of 2/10, n/30.All consulting clients must sign a contract, which is also signed by an ABC manager.One member of ABC's management team assigns at least one consultant to work with the customer until the engagement is complete.Consultants can be assigned to multiple engagements simultaneously, but every consultant must always be working on at least one engagement.Each client may have only one contract with ABC at a time.The smallest possible number of internal agents in the third column of a REA model of the case is:

A)One
B)Two
C)Three
D)None.Internal agents do not appear in the third column of a REA model.

Question 23

Consider the following REA diagram as you respond to the question: Which of the following is an internal agent in the model?

A)Vendor
B)Purchasing agent
C)Both vendor and purchasing agent
D)Neither vendor nor purchasing agent

Question 24

Consider the following short case as you respond to the next nine questions: ABC Consulting's employees include management, consultants and office staff.The company accepts engagements related to internal control design and evaluation, as well as enterprise risk management plans.A customer can purchase the two services independently of one another.The office staff bills clients on a monthly basis with terms of 2/10, n/30.All consulting clients must sign a contract, which is also signed by an ABC manager.One member of ABC's management team assigns at least one consultant to work with the customer until the engagement is complete.Consultants can be assigned to multiple engagements simultaneously, but every consultant must always be working on at least one engagement.Each client may have only one contract with ABC at a time.In a REA model of the case, events would include:

A)Sign contract
B)Assign employees
C)Bill customer
D)All of these

Question 25

Consider the following REA diagram as you respond to the question: Which of the following is an external agent in the model?

A)Vendor
B)Purchasing agent
C)Both vendor and purchasing agent
D)Neither vendor nor purchasing agent

Question 26

Consider the following short case as you respond to the next nine questions: ABC Consulting's employees include management, consultants and office staff.The company accepts engagements related to internal control design and evaluation, as well as enterprise risk management plans.A customer can purchase the two services independently of one another.The office staff bills clients on a monthly basis with terms of 2/10, n/30.All consulting clients must sign a contract, which is also signed by an ABC manager.One member of ABC's management team assigns at least one consultant to work with the customer until the engagement is complete.Consultants can be assigned to multiple engagements simultaneously, but every consultant must always be working on at least one engagement.Each client may have only one contract with ABC at a time.A REA model of the case would include ___ resources.

A)Zero
B)One or two
C)Three or four
D)More than four

Question 27

To answer the question, consider the following partial REA model in the context of the case: ABC Consulting's employees include management, consultants and office staff.The company accepts engagements related to internal control design and evaluation, as well as enterprise risk management plans.A customer can purchase the two services independently of one another.The office staff bills clients on a monthly basis with terms of 2/10, n/30.All consulting clients must sign a contract, which is also signed by an ABC manager.One member of ABC's management team assigns at least one consultant to work with the customer until the engagement is complete.Consultants can be assigned to multiple engagements simultaneously, but every consultant must always be working on at least one engagement.Each client may have only one contract with ABC at a time. If Box B is labeled "consultants," Box A could be labeled:

A)Assign employees
B)Complete engagement
C)Either assign employees or complete engagement
D)Neither assign employees nor complete engagement

Question 28

When the maximum cardinalities between two elements of a REA model are many and many:

A)Create a junction table.
B)Redesign the REA model to eliminate them.
C)The REA model has errors.
D)One of the elements must be a resource.

Question 29

Which of the following statements about database tables and REA models is most true?

A)Every box in a REA model requires the creation of exactly one table.
B)Cardinalities help ensure that database tables are in third normal form.
C)Both every box in a REA model requires the creation of exactly one table and cardinalities help ensure that database tables are in third normal form are true.
D)Neither every box in a REA model requires the creation of exactly one table nor cardinalities help ensure that database tables are in third normal form is true.

Question 30

Consider the following short case as you respond to the next nine questions: ABC Consulting's employees include management, consultants and office staff.The company accepts engagements related to internal control design and evaluation, as well as enterprise risk management plans.A customer can purchase the two services independently of one another.The office staff bills clients on a monthly basis with terms of 2/10, n/30.All consulting clients must sign a contract, which is also signed by an ABC manager.One member of ABC's management team assigns at least one consultant to work with the customer until the engagement is complete.Consultants can be assigned to multiple engagements simultaneously, but every consultant must always be working on at least one engagement.Each client may have only one contract with ABC at a time.In a REA model of the case, the cardinalities between the "assign employees" event and the agent "employees" would be:

A)Assign employees (0,*) --- (1,1) Employees
B)Assign employees (0,*) --- (1,*) Employees
C)Assign employees (1,*) --- (1,*) Employees
D)None of these

Question 31

Which of the following is most likely to be a primary key in an "employee" table?

A)Last name
B)Employee ID number
C)Both last name and employee ID number together
D)Either last name or employee ID number separately

Question 32

To answer the question, consider the following partial REA model in the context of the case: ABC Consulting's employees include management, consultants and office staff.The company accepts engagements related to internal control design and evaluation, as well as enterprise risk management plans.A customer can purchase the two services independently of one another.The office staff bills clients on a monthly basis with terms of 2/10, n/30.All consulting clients must sign a contract, which is also signed by an ABC manager.One member of ABC's management team assigns at least one consultant to work with the customer until the engagement is complete.Consultants can be assigned to multiple engagements simultaneously, but every consultant must always be working on at least one engagement.Each client may have only one contract with ABC at a time. If Box A is labeled "assign employees," Box B could be labeled:

A)Management
B)Consultants
C)Complete engagement
D)Any of these

Question 33

Which of the following is likely to require at least one junction table if present in a REA model?

A)Purchasing goods from suppliers
B)Sending an order to a supplier
C)Both purchasing goods from suppliers and sending an order to a supplier
D)Neither purchasing goods from suppliers nor sending an order to a supplier

Question 34

Consider the following short case as you respond to the next nine questions: ABC Consulting's employees include management, consultants and office staff.The company accepts engagements related to internal control design and evaluation, as well as enterprise risk management plans.A customer can purchase the two services independently of one another.The office staff bills clients on a monthly basis with terms of 2/10, n/30.All consulting clients must sign a contract, which is also signed by an ABC manager.One member of ABC's management team assigns at least one consultant to work with the customer until the engagement is complete.Consultants can be assigned to multiple engagements simultaneously, but every consultant must always be working on at least one engagement.Each client may have only one contract with ABC at a time.How many agents would be depicted in the rightmost column of a REA model of the case?

A)One
B)Two
C)Three
D)None.Agents do not appear in the rightmost column of a REA model.

Question 35

When the maximum cardinalities between two elements of a REA model are one and many:

A)Include the primary key from the "one side" in the table on the "many side."
B)Include the primary key from the "many side" in the table on the "one side."
C)Create a junction table.
D)The REA model has errors.

Question 36

Consider the following REA diagram as you respond to the question: How many agents are represented in the model?

A)One
B)Two
C)Three
D)Four

Question 37

A REA model includes "send order" as an event and "customer" as an agent.Which of the following is most true?

A)The primary key from the "send order" table should be included in the "customer" table.
B)The primary key from the "customer" table should be included in the "send order" table.
C)Both the primary key from the "send order" table should be included in the "customer" table and the primary key from the "customer" table should be included in the "send order" table
D)Neither the primary key from the "send order" table should be included in the "customer" table nor the primary key from the "customer" table should be included in the "send order" table

Question 38

Consider the following short case as you respond to the next nine questions: ABC Consulting's employees include management, consultants and office staff.The company accepts engagements related to internal control design and evaluation, as well as enterprise risk management plans.A customer can purchase the two services independently of one another.The office staff bills clients on a monthly basis with terms of 2/10, n/30.All consulting clients must sign a contract, which is also signed by an ABC manager.One member of ABC's management team assigns at least one consultant to work with the customer until the engagement is complete.Consultants can be assigned to multiple engagements simultaneously, but every consultant must always be working on at least one engagement.Each client may have only one contract with ABC at a time.How many external agents would be depicted in the first column of a REA model of the case?

A)Zero
B)One
C)Two
D)Three

Question 39

Consider the following short case as you respond to the next nine questions: ABC Consulting's employees include management, consultants and office staff.The company accepts engagements related to internal control design and evaluation, as well as enterprise risk management plans.A customer can purchase the two services independently of one another.The office staff bills clients on a monthly basis with terms of 2/10, n/30.All consulting clients must sign a contract, which is also signed by an ABC manager.One member of ABC's management team assigns at least one consultant to work with the customer until the engagement is complete.Consultants can be assigned to multiple engagements simultaneously, but every consultant must always be working on at least one engagement.Each client may have only one contract with ABC at a time.In a REA model of the case, how many boxes would you expect to see in the second column?

A)One
B)Two
C)Three or four
D)More than four

Question 40

Consider the following REA diagram as you respond to the question: Which of the following statements about the REA model is least true?

A)A purchase of supplies can occur with no purchasing agent involvement.
B)A purchasing agent may be involved in no purchases of supplies.
C)Exactly one purchasing agent must be involved in each purchase of supplies.
D)Purchasing agents and vendors have no relationship outside the context of a "purchase supplies" transaction.

Question 41

Consider the following REA model as you answer the question: How many junction tables will be required by the preceding REA model?

A)Two
B)Three
C)Four
D)Some other number

Question 42

Consider the following REA model as you answer the question: A field labeled "inventory ID" is likely to appear in which of the following tables? (i) inventory table, (ii) purchase inventory table, (iii) inventory/purchase inventory table.

A)I and II only
B)I and III only
C)II and III only
D)I, II and III

Question 43

Based on the principles of normalization, an inventory table would include all of the following fields except:

A)Transaction number
B)Item code
C)Description
D)Beginning quantity on hand

Question 44

Consider the following diagram as you answer the questions: Every "Event B" is completed by exactly one employee, but an individual employee may complete no "Event B" transactions.If employees who do complete "Event B" transactions may do so without limit, which of the following is the most appropriate for "C?"

A)(0,1)
B)(1,1)
C)(0,*)
D)(1,*)

Question 45

Consider the following diagram as you answer the questions: Jon and Sam are current employees.Jon has never hired a new employee, but Sam has hired many.Which of the following is most appropriate for "E?"

A)(0,1)
B)(1,1)
C)(0,*)
D)(1,*)

Question 46

Consider the following REA model as you answer the question? Which of the following tables is indicated by the preceding REA model:

A)Supplier/employee table
B)Supplier/purchase inventory table
C)Employee/purchase inventory table
D)Inventory/purchase inventory table

Question 47

Consider the following REA model as you answer the question: Which of the following would be foreign keys in the "purchase inventory" table?

A)Supplier ID
B)Employee ID
C)Both supplier ID and employee ID
D)Neither supplier ID nor employee ID

Question 48

Consider the following REA model as you answer the question: Based on the preceding REA model, which of the following statements is most true?

A)The inventory table will not have a foreign key.
B)The primary key from the "purchase inventory" table will appear in the supplier table.
C)The primary key from the "purchase inventory" table will appear in the employee table.
D)All of these statements are true.

Question 49

Consider the following diagram as you answer the questions: Which of the following junction tables would be included in a relational database of the model?

A)employee/interview finalists
B)employee/hire applicant
C)Both employee/interview finalists and employee/hire applicant
D)Neither employee/interview finalists nor employee/hire applicant

Question 50

Consider the following diagram as you answer the questions: The most appropriate label for "B" is:

A)perform initial screening
B)record receipt of application materials
C)either perform initial screening or record receipt of application materials
D)some other label

Question 51

Consider the following diagram as you answer the questions: All of the following will be fields in the "interview finalists" table except:

A)Employee ID
B)Applicant ID
C)Interview date
D)Interview time

Question 52

Consider the following REA model as you answer the question: The "employee" table is likely to include which of the following fields? (i) department, (ii) gender.

A)I only
B)II only
C)Both I and II
D)Neither I nor II

Question 53

Consider the following diagram as you answer the questions: The most appropriate label for "D" is:

A)applicant
B)application materials
C)verify application materials
D)some other label

Question 54

Consider the following diagram as you answer the questions: Jon and Sam are current employees.Jon has never hired a new employee, but Sam has hired many.Which of the following statements is most true?

A)A new agent should be added to the model.
B)A new event should be added to the model.
C)The primary key from the "hire applicant" table should be included in the "employee" table.
D)The primary key from the "employee" table should be included in the "hire applicant" table.

Question 55

Consider the following diagram as you answer the questions: The most appropriate label for "A" is:

A)applicant
B)application materials
C)submit application materials
D)some other label

Question 56

Consider the following REA model as you answer the question: The "employee" table is likely to include all of the following fields except:

A)Department
B)Gender
C)Last name
D)Age

Question 57

Consider the following diagram as you answer the questions: Frodo and Gandalf are current employees.Frodo has participated in no instances of Event B, while Gandalf has participated in at least five.Which of the following statements is most true?

A)The primary key from the "employee" table will be the primary key of the "Event B" table.
B)The primary key from the "Event B" table will be the primary key of the "employee" table.
C)The primary key from the "Event B" table will be a foreign key in the "employee" table.
D)The primary key from the "employee" table will be a foreign key in the "Event B" table.

Question 58

Consider the following REA model as you answer the question: How many database tables will be required by the preceding REA model?

A)Four
B)Five
C)Six
D)Some other number

Question 59

Consider the following diagram as you answer the questions: The smallest number of interviews an applicant may have is:

A)zero
B)one
C)many
D)not determinable based on the model.

Question 60

Consider the following REA model as you answer the question: A field labeled "transaction ID" is likely to appear in which of the following tables based on the REA model above?

A)Purchase inventory table
B)Inventory/purchase inventory table
C)Both purchase inventory table and inventory/purchase inventory table
D)Neither purchase inventory table nor inventory/purchase inventory table

Question 61

Consider the REA model below:
List all the tables indicated by the model.

Question 62

Based on a REA model, an accountant created an inventory table, a purchase inventory table and a purchases/inventory table.Several field names that might appear in those tables are listed below.Organize them into the appropriate tables based on the principles of database normalization.Specify primary keys with underlines and foreign keys with brackets.Some of the field names may be used in more than one table; others may not be used at all."As of" date for beginning inventory
Beginning quantity on hand
Cost per unit of beginning inventory
Inventory description
Inventory item number
Number of units purchased
Price per unit purchased
Purchasing agent ID
Total cost of inventory on hand
Total cost of inventory purchases
Transaction date
Transaction number
Vendor ID

Question 63

Determine whether each of the following items applies to: (a) view-driven systems only, (b) event-driven systems only, (c) both view- and event-driven systems or (d) neither view- nor event-driven systems.1) Capable of generating a balance sheet
2) Captures a more comprehensive data set
3) Comprises five basic parts
4) Converts information into decisions
5) Incorporates data that may not be presented in the general purpose financial statements
6) Must use information technology
7) Records transactions using the principles of debit and credit
8) Should be designed with the FASB Conceptual Framework in mind
9) Transforms data into information
10) Typically incorporates journals and ledgers

Question 64

The Association of Certified Fraud Examiners offers one- and two-day seminars to its members throughout the year; members find out about the seminars via the association's web site or a catalog mailed on a quarterly basis.Each seminar must have at least ten registrants, but can have no more than thirty registrants.The ACFE maintains registrant records independently of each seminar since a registrant may be involved in multiple seminars over time.Association staff process seminar registrations, which may come in through the mail, over the phone or via the web site.Payment must be made in advance in one or more installments; the association does not refund registration fees for "no-shows." Each seminar has a single speaker who is paid a fixed fee regardless of the number of attendees; the speaker's fee is paid at the end of the seminar.A speaker may present the same seminar multiple times during the year, but each speaker is focused on a single seminar topic.At the end of each seminar, attendees receive a signed certificate of completion after they respond to a short quiz based on the seminar's content.Create a REA model for the registration and collection process.

Question 65

List five weaknesses associated with view-driven accounting information systems.

Question 66

The Association of Certified Fraud Examiners offers one- and two-day seminars to its members throughout the year; members find out about the seminars via the association's web site or a catalog mailed on a quarterly basis.Each seminar must have at least ten registrants, but can have no more than thirty registrants.Association staff process seminar registrations, which may come in through the mail, over the phone or via the web site.Payment must be made in advance; the association does not refund registration fees for "no-shows." Each seminar has a single speaker who is paid a fixed fee regardless of the number of attendees; the speaker's fee is paid at the end of the seminar.A speaker may present the same seminar multiple times during the year, but each speaker is focused on a single seminar topic.At the end of each seminar, attendees receive a signed certificate of completion after they respond to a short quiz based on the seminar's content.Create database specifications (table and field names) for the registration and collection process.Indicate primary keys by underlining and foreign keys with brackets.

Question 67

In your own words, explain the steps used to create a REA model.

Question 68

Fill in the blanks below based on the principles of REA modeling.
a.___ events focus on activities involved with providing goods and services to customers.
b.___ events deal with recording and maintaining data.
c.___ events are concerned with human decision making.
d.The leftmost column in a REA model presents ___.
e.The middle column in a REA model presents ___.
f.The rightmost column in a REA model presents ___.
g.___ tell an accounting professional about the relationships between elements of a REA model.

Question 69

Analyze the REA model below.Identify and describe (in narrative form) the tables you would create based on the model; do not describe the tables by listing the field names.

Question 70

Which of the following statements are true based on the REA model provided?

Question 71

Prepare a narrative description of the business process illustrated in the REA model below.

Question 72

Create cardinalities for each of the following independent situations.Format the cardinalities as they would appear in a REA model.
a.A customer may purchase inventory multiple times; every inventory purchase is tied to a single customer.
b.A "purchase inventory" transaction may involve multiple inventory items; an individual inventory item may be sold many times or not at all.
c.Each inventory purchase is authorized by a single purchasing agent; the number of authorizations for each purchasing agent can be as few as one, but has no upper limit.
d.A bank deposit is processed by a single teller; a teller can process an unlimited number of deposits, but must process at least one each day.
e.An individual "process bank deposit" transaction may involve multiple checks; an individual check can be deposited only one time.

Question 73

REA models often are created using the six-step process described in the text; after they are created, they are often used to create database tables.List and discuss three internal controls you would recommend implementing in the six-step process and/or the database creation process.

Question 74

Fill in the blanks below based on the weaknesses of view-driven AIS described in the text.
a.They focus on a very small, well-defined group of important ___.
b.They often process data in ___, frequently at the ___.
c.The data in a view-driven AIS are often ___ because of when they are processed.
d.The system captures a very limited set of data: ___, ___ and ___.
e.Data in a view-driven system are highly ___ and stored in ___.
f.In view-driven systems, the ___ process is often protective and expensive.

Question 75

Most AIS designers and auditors find it best to start a REA model by identifying events, which come in three broad categories: operating, information and decision/management.Which category best describes each item below?
a.Buying supplies
b.Deciding how to document an AIS
c.Designing internal controls
d.Developing a risk management plan
e.Issuing capital stock
f.Motivating employees
g.Posting transactions to the ledger
h.Purchasing advertising
i.Recording transactions in a journal
j.Selling equipment