END OF CHAPTER MATERIAL

CONCEPT CHECK

1. 1. IT governance includes all but which of the following responsibilities?
   1. Aligning IT strategy with the business strategy
   2. Writing programming code for IT systems
   3. Insisting that an IT control framework be adopted and implemented
   4. Measuring IT's performance
2. 2. Which phase of the system development life cycle includes determining user needs of the IT system?
   1. Systems planning
   2. Systems analysis
   3. Systems design
   4. Systems implementation
3. 3. Which of the following is not part of the system design phase of the SDLC?
   1. Conceptual design
   2. Evaluation and selection
   3. Parallel operation
   4. Detailed design
4. 4. Which of the following feasibility aspects is an evaluation of whether the technology exists to meet the needs identified in the proposed change to the IT system?
   1. Technical feasibility
   2. Operational feasibility
   3. Economic feasibility
   4. Schedule feasibility
5. 5. The purpose of the feasibility study is to assist in
   1. selecting software
   2. designing internal controls
   3. designing reports for the IT system
   4. prioritizing IT requested changes
6. 6. Within the systems analysis phase of the SDLC, which of the following data collection methods does not involve any feedback from users of the IT system?
   1. Documentation review
   2. Interviews using structured questions
   3. Interviews using unstructured questions
   4. Questionnaires
7. 7. A request for proposal (RFP) is used during the
   1. phase-in period
   2. purchase of software
   3. feasibility study
   4. in-house design
8. 8. Which of the following steps within the systems implementation phase could not occur concurrently with other steps, but would occur at the end?
   1. Employee training
   2. Data conversion
   3. Software programming
   4. Post-implementation review
9. 9. Each of the following are methods for implementing a new application system except
   1. direct cutover conversion
   2. parallel conversion
   3. pilot conversion
   4. test method conversion
10. 10. A retail store chain is developing a new integrated computer system for sales and inventories in its store locations. Which of the following implementation methods would involve the most risk?
    1. Direct cutover
    2. Phased-in implementation
    3. Parallel running
    4. Pilot testing
11. 11. The use of the SDLC for IT system changes is important for several reasons. Which of the following is not a part of the purposes of the SDLC processes?
    1. As part of strategic management of the organization
    2. As part of the internal control structure of the organization
    3. As part of the audit of an IT system
    4. As partial fulfillment of management's ethical obligations
12. 12. Confidentiality of information is an ethical consideration for which of the following party or parties?
    1. Management
    2. Employees
    3. Consultants
    4. All of the above

DISCUSSION QUESTIONS

1. 13. (SO 3) Near the beginning of Chapter 6, the real-world example of Allstate's IT expenditure is mentioned. Prior to the implementation of its IT governance committee, “whoever spoke the loudest or whoever had the biggest checkbook” got to select IT projects. What do you think the problems were with this kind of approach?
2. 14. (SO 1) Why is it important that IT systems be aligned with the business strategy?
3. 15. (SO 1) Why would IT governance include measuring the performance of IT systems?
4. 16. (SO 3) What is the difference between technical feasibility and operational feasibility?
5. 17. (SO 3) How does the analysis of feasibilities in the systems planning phase help to prioritize system changes?
6. 18. (SO 4) What is the advantage of studying the current system during the systems analysis phase?
7. 19. (SO 4) During the systems analysis phase, which two data collection methods help determine user requirements?
8. 20. (SO 5) What are the advantages of purchased software when compared with software developed in-house?
9. 21. (SO 5) Why might it be important to follow some or all of the SDLC phases for purchased software?
10. 22. (SO 5) How is conceptual design different from detailed design?
11. 23. (SO 5) Within the system design phase, what are the purposes of evaluation and selection?
12. 24. (SO 5) Which part of the system design phase would include designing rows and columns of output reports? Why is it important to design reports?
13. 25. (SO 6) What is the purpose of software testing?
14. 26. (SO 6) How are accountants involved in data conversion?
15. 27. (SO 6) Why is a direct cutover conversion risky?
16. 28. (SO 6) Why is parallel conversion costly?
17. 29. (SO 6) Why is user acceptance important?
18. 30. (SO 6) Why is post-implementation review undertaken?
19. 31. (SO 8) How does the SDLC serve as an internal control?
20. 32. (SO 9) What ethical obligations do employees have as IT systems are revised?

BRIEF EXERCISES

1. 33. (SO 1) Describe the role that the board of directors should play in IT governance.
2. 34. (SO 3, SO 5) Two feasibility studies occur during the SDLC: one during systems planning and one during systems design. Describe the differences between these two feasibility studies.
3. 35. (SO 4) There are four methods of data collection used in the study of the current system: observation, documentation review, interviews, and questionnaires. Compare and contrast these four methods.
4. 36. (SO 4) Describe the purpose of business process reengineering during the system analysis phase.
5. 37. (SO 6) There are four methods of system conversion: parallel, direct cutover, pilot, and phase-in. Describe these four methods and how they differ.
6. 38. (SO 7) Operation and maintenance is the longest and costliest part of the SDLC. Explain why this is true.
7. 39. (SO 7) Describe how IT performance reports are important in IT governance.
8. 40. (SO 9) What is the underlying purpose of the restrictions on CPA firms in Section 201 of the Sarbanes–Oxley Act?

PROBLEMS

1. 41. (SO 1) Mega Corporation just became a public corporation when shares of its stock were sold to the public three months ago. A new board of directors has been appointed to govern the corporation. Assume that you will be giving a presentation to the board members on their responsibilities for IT systems. Write a report that could be delivered to the board.
2. 42. (SO 2) Brumarch MultiMedia Stop is a regional retailer of consumer electronics, with warehouses and stores located in several large cities in California. The board and top management of Brumarch are considering updating their accounting, inventory, and retail sales software and hardware. The current systems are approximately 15 years old. Assume that you have been hired as a consultant to guide them through the process of upgrading their systems. Write a document that could be presented to the board of directors and that summarizes the SDLC.
3. 43. (SO 4) Assume that you are the manager of the project team that is engaged in a systems analysis. The company is a large, national retailer with several stores and warehouses located throughout the United States. The corporate headquarters are in Atlanta, and all major accounting takes place at the corporate headquarters. Describe how you would use the various data collection techniques of observation, documentation review, interviews, and questionnaires.
4. 44. (SO 5) CEEMCO Corp. is a small, privately owned manufacturing company in Cincinnati. CEEMCO manufactures custom products as well as store display products to sell to other companies such as retailers. Using an Internet search engine, do a search on the terms “CEEMCO” and “Cincinnati.” Examine the kind of manufacturing the company does. Once you have completed that, study an accounting software site such as www.2020software.com or www.accountingsoftware411.com. Complete the following:
   1. Describe the process CEEMCO should undertake to determine which accounting software might be the best fit for the company.
   2. Although you do not know much about the company, develop a list of requirements you believe that any accounting software should have in order for CEEMCO to consider the software as a viable alternative.
   3. Choose an accounting software from your Web search, and describe why you believe it is a good match for CEEMCO.
5. 45. (SO 2) There are several approaches to applying an SDLC methodology to IT system change. Using an Internet search engine, search for these terms: SDLC, waterfall, JAD (joint application development), RAD (rapid application development), build and fix, and spiral model. For example, you might try entering these search terms: SDLC waterfall. From your search results, write a brief definition of these various approaches to the system development life cycle.
6. 46. (SO 9) Tannell Johnson is an accounting software consultant at Fipps and Associates Consulting. Fipps is a value-added reseller of accounting software for midsize companies, which normally have revenue between 50 million and 500 million dollars. One of Johnson's responsibilities is to solicit new client companies and to meet with their management to recommend the best accounting software system for them. Midmarket accounting software typically offers several modules that the client may choose from. For example, not all clients would need an e-business module for their accounting software. Since part of Johnson's compensation is a percentage of software sales and consulting revenue that he generates, what are the ethical conflicts he faces when soliciting new clients and recommending software and software modules?

CASES

1. 47. The Electronics Shak is a retailer of electronics such as cell phones, satellite radios, mp3 players, and high-end LCD and plasma TVs. The Electronics Shak is a large chain with stores in strip shopping centers throughout the United States. However, each store is small, with generally five to six employees and a manager. Each store sells much less volume than a large electronics retailer such as Best Buy or Circuit City.

   Top management has recently become concerned with what appears to be an excessive amount of inventory loss (shrinkage) at many of its stores. At this point, the management team is uncertain whether the excessive loss is due to weaknesses in its IT system that tracks inventory or to customer and employee theft at the stores. Top managers are concerned that the IT system may be a contributing factor to the loss and would like to study whether a new system should be implemented. Through their industry contacts, they know that large retailers such as Best Buy and Circuit City use much more sophisticated inventory management systems than The Electronic Shak does.

   A systems analysis would require a cost–benefit analysis and a feasibility study. Describe steps that The Electronic Shak should take to complete a cost– benefit analysis and a feasibility study for a new IT system to track inventory.

2. 48. Schibey International is in the process of purchasing a new accounting software system. Schibey is in a very specialized industry, with an international market. The company manufactures specialized parts to sell to companies in the oil exploration and drilling industry. The corporate headquarters are in Fort Worth, Texas, and a significant number—approximately one-half—of their operations are U.S.-based. They also maintain production plants and a sales and support staff in most oil-producing countries. Explain the factors that Schibey should consider when determining which software system will best suit its needs.
3. 49. Refer to case 48. Describe which parts of the design phase Schibey should undertake to ensure that the purchased software matches with the business processes that it will use.

CONTINUING CASE: ROBATELLI'S PIZZERIA

Reread the Robatelli's Pizzeria Continuing Case in Chapter 1 and then read the additional paragraphs that follow.

Back at her desk, Elaine Black is thinking of the day's developments. She reflects upon her meeting with Jim Saxton and Peter Greyton. She considers where the company has been and where it is heading, and ponders the current issues regarding Robatelli's accounting information systems.

Overall, Elaine feels that she needs help aligning Robatelli's business strategy with its IT systems. In addition, she is concerned about the limitations of the current accounting information system. Are internal controls strong enough? Would a new, integrated IT system yield improvements? As she contemplates the integration of the POS systems at the restaurant locations with the GL software at the home office, she wonders about the requirements for developing and implementing such a system, and how to best utilize the system to support Robatelli's business strategy. Elaine realizes that her ability to address these issues will be critical not only to the success of the company, but also to her career. She asks herself, “What should I do now?”

Required:

Assume that you are Jim Saxton preparing a report for Elaine Black, the CIO. Address the following:

1. Do you think Robatelli's business strategy is driving the development of its information systems, or vice versa? Use points from the case to support your answer.
2. Describe the steps Robatelli's should take (according to the systems development life cycle stages) to ensure that its IT systems are aligned with its business strategy.
3. Describe whether any parts of Robatelli's IT system could be adapted to cloud computing.

SOLUTIONS TO CONCEPT CHECK

1. 1. (SO 1) IT governance includes all the given choices, except b. writing programming code for IT systems. IT governance does include aligning IT strategy with business strategy, insisting that an IT control framework be adopted, and measuring IT performance.
2. 2. (SO 2, SO 4) The phase of the system development life cycle that includes determining user needs of the IT system is b. systems analysis. The systems analysis phase includes a study of the current system to determine strengths and weaknesses of the system, and a determination of user needs.
3. 3. (SO 2, SO 5) c. Parallel operation is not part of the system design phase of the SDLC. The system design phase can be divided into conceptual design, evaluation and selection, and detailed design. Parallel operation occurs within the systems implementation phase.
4. 4. (SO 3) The feasibility aspect that is an evaluation of whether the technology exists to meet the need identified in the proposed change to the IT system is a. technical feasibility. The purpose of the evaluation of technical feasibility is to assess the realism of the possibility that the technology exists to meet the need identified in the proposed change to the IT system.
5. 5. (SO 3) The purpose of the feasibility study is to assist in d. prioritizing IT requested changes. The feasibility study helps determine which proposed IT systems or changes have a realistic possibility of being achievable from the standpoint of technical, operational, economic, and schedule feasibility. Those suggested changes that are less feasible will be ranked lower and, therefore, have a lower priority.
6. 6. (SO 4) Within the systems analysis phase of the SDLC, the data collection method that does not involve any feedback from users of the IT system is a. documentation review. Interviews and questions require that users answer either structured or unstructured questions. Therefore, these methods of data collection allow users to provide feedback. Documentation review is a review of documentation for the IT system and does not involve obtaining feedback from users.
7. 7. (SO 5) A request for proposal (RFP) is used during the b. purchase of software. An RFP is a request to bid. Organizations use RFPs to request bids on software.
8. 8. (SO 6) The following steps within the systems implementation phase that could not occur concurrently with other steps, but would occur at the end, make up the d. post-implementation review. A post-implementation review is a review of the SDLC process to determine whether any estimates or processes were incorrect and must occur after the other implementation processes are completed.
9. 9. (CIA Adapted) (SO 6) Each are methods for implementing a new application system except d. test. Although all systems should be tested before implementation, there is no one specific test method for all systems implementation.
10. 10. (CIA Adapted) (SO 6) A retail store chain is developing a new integrated computer system for sales and inventories in its store locations. The implementation method that would involve the most risk is a. direct cutover. This approach would be considered risky, because it would involve all store locations carrying out a simultaneous implementation. Accordingly, there would be no opportunity to compare results between the old and new systems, and any problems or “bugs” would adversely affect every location.
11. 11. (SO 7) The use of the SDLC for IT system changes is important for several reasons, but, c. as part of the audit of an IT system, is not among the SDLC's purposes. The SDLC processes are critical as part of strategic management of the organization, as part of the internal control structure of the organization, and as partial fulfillment of management's ethical obligations. The SDLC helps ensure that IT strategy is aligned with business strategy, that system changes are properly controlled, and that management has attempted to fulfill its ethical obligation to maintain adequate IT systems. The SDLC is not an integral part of an IT audit.
12. 12. (SO 9) Confidentiality of information is an ethical consideration for d. all of the above. Management, employees, and consultants all have an ethical obligation to keep proprietary or sensitive information confidential.