Accounting Information Systems: An Overview Chapter 1

Understand the related concepts of transaction cycles and Learning Objective 1 Understand the related concepts of transaction cycles and internal control structure.

Overview An accounting information system (AIS) is a collection of resources designed to transform data into information. Accounting information systems perform this transformation. Manual Computerized

Information and Decisions Who are the two main users of accounting information? External users Internal users

Information and Decisions Who are the external users of accounting information? Stockholders Investors Creditors Government agencies Customers and vendors

Information and Decisions Hierarchy of Internal Users Top-Level Management Strategic Middle Management Summarization and Filtration Tactical Lower-Level Management Operational Transaction oriented

Information Systems The term information system suggests the use of computer technology in an organization. Hardware Data Information Software

Information Systems Electronic Data Processing System (EDP) Data Processing System (DP) Management Information System (MIS) Decision Support System (DSS) Expert System (ES) Executive Information System (EIS) Accounting Information System (AIS)

Business Processes Tasks: Data Organizational units Logical time sequence

Primary Business Processes Inbound sales logistics Outbound sales logistics Operations Marketing Service

Supporting Business Processes Procurement Technology development Human resources Firm infrastructure

Transaction Processing Cycles 1. Revenue cycle 2. Expenditure cycle 3. Production cycle 4. Finance cycle

Internal Control Process Reliability of financial reporting Effectiveness and efficiency Compliance

Internal Control Process What are the elements of internal control? Control environment Risk assessment Control activities Information and communication Monitoring

Internal Control Process Segregation of Duties: No individual or department should control the accounting records relating to its own operation. Internal Auditing: It is an independent appraisal activity within the organization.

Describe the organizational structure of the information Learning Objective 2 Describe the organizational structure of the information system function in organizations.

The Information System Function Chief Information Officer Manager Systems Analysis Programming Operations Technical Support User Steering Committee

The Information System Function Manager Systems Analysis Manager Programming Application Analysts Programmers

The Information System Function Manager Operations Maintenance Programmers Computer Operators Data Entry File Librarian

The Information System Function Manager Technical Support Database Administration Communication Analysts Systems Programmers

The Information System Function Project organizations Analysts Programmers Application projects

Discuss applications of information technology Learning Objective 3 Discuss applications of information technology in organizations.

End-User Computing End-user computing (EUC) is the hands-on use of computers by end users. Functional end users do their own information processing activities.

EUC: Mainframe Application User Submits Query Language Job User Report Database Accounts Receivable Data Processor Access Control Software

Data Processing for the End User Traditional Approach User Information System Specialists Data Processing

Data Processing for the End User End-User Computing Approach User Database Software or Personal Computer Data Processing

EUC: Stand-Alone PC Application Mainframe Data or Report Personal Computer Report User Prepared Data

Quick-Response Technology Quick-response systems are essential to the total quality performance (TQP) movement in business. TQP is also called TQM or total quality management. TQP emphasizes customer satisfaction.

Quick-Response Technology Hardware and software standardization Electronic data interchange (EDI) Universal product code (UPC) bar code identification of products and scanning technologies

Quick-Response Technology Retailer’s Computer System Retail Sale of Product Scan Bar Code Electronic Data Interchange Vendor’s Computer System Ship Order

Web Commerce Sales via the World Wide Web are an integral part of the economy. What are some benefits? Consumers No waiting in line Merchants Cost savings

Electronic Data Interchange Retailer Supplier Purchase Order Eliminates paper Saves time

Extensible Business Reporting Language XBRL is a language that facilitates the exchange over the Internet of all kinds of business documents and financial statements.

Computer-Integrated Manufacturing What are the components of a CIM system? Computer-aided design (CAD) workstations Real-time production monitoring and control systems Order and inventory control system

Electronic Payment Systems (EFT) Electronic funds transfer systems are electronic payment systems in which processing and communication are primarily or totally electronic. Banks can interface with corporate EDI applications.

Characterize the development of information systems. Learning Objective 4 Characterize the development of information systems.

The Accountant and Systems Development Accountants may undertake systems development activities either internally or externally. Systems development activities are often encountered by internal and external auditors during reviews of information systems controls.

The Accountant and Systems Development Systems Development Project: Systems analysis Systems design Systems implementation

The Accountant and Systems Development What are the general objectives of systems analysis? To improve the quality of information To improve internal control To minimize cost, where appropriate

The Accountant and Systems Development Systems design is the process of specifying the details of the solution selected by the systems analysis process.

The Accountant and Systems Development Systems implementation is the process of placing the revised or newly designed procedures and methods into operations. Testing the solution prior to implementation Documenting the solution Reviewing the system

Systems Approach What is the systems approach? It is a general procedure for the administration of a systems project. Its purpose is to assist in the orderly development of effective systems. What are the six steps of the systems approach process?

Systems Approach 1 Statement of system objective(s) Creation of alternatives 2 Systems analysis 3 Systems design 4 Systems implementation 5 Systems evaluation 6

Behavioral Considerations A new information system creates new work relationships among existing personnel. It creates changes in job content and perhaps a change in the formal organizational structure.

Behavioral Considerations The user cooperation needed to operate the system successfully should be ensured during the design of a system, not afterward. A philosophy of user-oriented design fosters a set of attitudes and an approach to systems development that consciously considers the organizational context.

End of Chapter 1