Chapter 10 Developing and Implementing Effective Accounting Information Systems Introduction The System Development Life Cycle: An Introduction Systems Planning Systems Analysis Detailed Systems Design Implementation, Follow-up, and Maintenance

An Introduction IT governance is the process of ensuring that it is effective, efficient, and strategic. A comprehensive IT strategy requires careful systems study and should prioritize the acquisition or development of various information systems

An Introduction development, implementation, and The IT systems study includes planning and analysis through development, implementation, and a feedback loop for each new IT application.

The Systems Development Life Cycle Organizations study and reengineer accounting systems because their current system is inefficient two or more accounting systems need to be combined the power of the Internet encourages development of a web presence A systems development work begins with a formal investigation of an existing information system, is performed by in-house professionals in large organizations a hired team of outside consultants in smaller organizations

The Four Stages in the Systems Development Life Cycle Planning and Investigation involves a preliminary investigation of the current system organizing a systems study team, and developing strategic plans. Analysis involves analyzing the company’s current system and identifying its needs, strengths, and weaknesses.

The Four Stages in the Systems Development Life Cycle Designing involves eliminating the current system’s weak points, and preserving its strengths. Implementation, follow-up, and maintenance includes acquiring resources for the new system, training new or existing employees, identifying any new problems.

System Development Life Cycle of a Business Information System

Systems Studies and Accounting Information Systems Systems studies are part of the greater task of reengineering one or more of the core systems of an organization. A systems study looks at applications portfolio, which includes an enterprise system, other specialized information systems, many separate systems for functional areas

Systems Studies and Accounting Information Systems A systems study means replacing or modifying existing information systems altering work flows, changing data gathering and recording tasks, revamping employee responsibilities, and revising ways of rewarding personnel

Systems Planning and Investigation Systems Planning and Investigation involves Planning for Success approach problems from a broad point of view, use an interdisciplinary study team to evaluate information systems, and make the study team work closely with a steering committee Broad Viewpoint in a Systems Study a systems approach aligned with mission, goals, and objectives.

Systems Planning and Investigation The Study Team and the Steering Committee top management personnel critical to the success of a new system. Investigating Current Systems reports the problems or objectives the study team identified, solutions or alternatives it investigated, and further course(s) of action it recommends.

The Study Team The Study Team consists of interdisciplinary specialists the importance of a broad viewpoint interdisciplinary knowledge communicates closely with company’s managers meaningfully to provide solutions who might be chosen as study team members?

The Preliminary Investigation separates the symptoms from the causes, considers alternatives to the current system, attempts to estimate the costs and benefits, and recommends desired alternatives. The study team submits this report to the company steering committee.

The Steering Committee interfaces between the company’s management and the study team includes top management personnel like the controller, the vice president of finance, the top-level information systems manager one or more staff auditors, and the CEO (for very important projects) may disband the study team and do nothing, perform further preliminary investigations, or proceed to the formal systems analysis stage

Systems Analysis The phases in systems analysis are: understanding the goals of the organization using system survey techniques to acquire sufficient information regarding problems analyzing data to suggest possible solutions to the systems problems evaluating system feasibility

Understanding The Goals Organization goals include: general systems goals, awareness that benefits should exceed the costs, concern that the output should help in better decisions, designing to allow optimal access to information, and flexibility to accommodate to changing information needs. top management systems goals, and long-range budget planning data periodic performance reports short-range operating performance of subsystems

Understanding The Goals operating management systems goals are normally easier to determine relate to well-defined and narrower organizational areas. are for the current business year are generated internally

Understanding The Goals Question In developing and implementing IT, the study team and steering committee must consider organizational goals. These include: a. General, technical, and top management goals b. General, operating management, and technical goals c. Top management, operating management, and economic goals d. Top management, operating management, and general systems goals

Systems Survey Work Objectives of a systems survey: The study team has to understand the company’s current system, its environment, strengths, and weaknesses The study team has to retain the system’s strengths and eliminate the system’s weaknesses.

Critical Success Factors The strategic success of an information system might be determined by achieving a small number of critical success factors. Two weaknesses of this approach are: It is biased toward the perceptions of top management It is difficult to analyze the responses to open-ended questions and managerial opinions about a system

Understanding the Human Element The appearance of a study team on the work scene usually signals change. The study team will meet employee resistance to change will have to deal directly with this problem must gain the full cooperation and support of the employees The best designed system ‘‘on paper’’ is likely to cause behavioral problems when implemented should have wide user support for true success

Data Gathering There are several ways of gathering data, including: Review of existing documentation. Observation of the current system Using questionnaires and surveys Review of internal control procedures Interviews with individual system participants

Data Analysis The study team must analyze the results which, includes creating summary statistics, developing flowcharts and/or process maps highlighting bottlenecks in information flows, reporting redundancy, and identifying missing information links.

Data Analysis Systems analysis work takes longer than a preliminary investigation, provides interim reports to the steering committee delivers the final systems analysis report.

Steps in the Systems Design Phase

Evaluating System Feasibility The design team must examine five feasibility areas: technical feasibility technical resources - hardware and software components operational feasibility examines its compatibility with the current operating environment schedule feasibility importance of completion on time legal feasibility system should comply with all applicable federal and state statutes economic feasibility anticipated benefits of the system exceed its projected costs

Evaluating System Feasibility Question The feasibility evaluation a. is completed prior to detailed systems design. b. includes economic, schedule, technical, legal, and operational feasibility. c. both a and b are true d. neither a nor b is true

Detailed Systems Design Processes Descriptions various processes in the revised system, what and by whom Data elements and data structure required data elements and preliminary data structure Inputs and outputs system inputs and outputs - descriptions Documentation operation of revised system and each subsystem

Detailed Systems Design Constraints restrictions like staffing limitations and regulatory requirements. Controls controls to reduce the risk of undetected errors Reorganization

Output, Process and Input Design Output Design may be classified according to the area of use should be able to a demand report should be able to trigger an exception report Processes Design earlier focus on what the system must provide now focus on how the system can provide it. Input Design describe each data element in the systems design specify the way data items must be coded

Detailed Systems Design Prototyping is developing a simplified model of a system is an iterative process of trial-use-and-modification is not recommended where the inputs, processing, and outputs are already clearly defined.

Detailed Systems Design The system specifications report produces a report after inputs, outputs, and processing requirements are clear submits this report to the steering committee - review, comment, and approval The Make or Buy Decision to use internal IT staff to develop the project in-house or to outsource the project’s development to a contractor.

Choosing an AIS In choosing an AIS The following must be the basis Selection Criteria. The Performance Capability of Each Proposed System Costs and Benefits of Each Proposed System Maintainability of Each Proposed System Compatibility of Each Proposed System with Existing Systems Vendor Support Making a Final Decision. Point-Scoring Analysis. Selecting a Finalist

Choosing an AIS Question In selecting a new accounting information system, the steering committee should consider a. all expected costs and benefits of the new systems, including maintenance and operating costs. b. support that a vendor can provide, including training, maintenance, and backup. c. compatibility of a new system with existing systems. d. All of the above are considerations in selecting a new system. e. Only a and b are important considerations in selecting the new system.

Outsourcing Outsourcing – two kinds Business Process Outsourcing (BPO) range from routine assistance with asingle application to almost all the accounting functions of the organization. Knowledge Process Outsourcing (KPO) - three areas intellectual property data mining of consumer data, and research and development related to medical drugs and biotechnology

Outsourcing Advantages and Disadvantages of Outsourcing. outsourcing also frees managerial time, financial assets, and related resources for other purposes disadvantage is inflexibility. loss of control is loss of competitive advantage

Implementation Implementation Activities Managing IT Implementation Projects Post-Implementation Review System Maintenance

Implementation Activities Implementation activities involve Preparation of the physical site Determination of functional changes Selection and assignment of personnel Training personnel Acquiring and installing computer equipment

Implementation Activities Establishing internal controls Converting data files Acquiring computer software Testing computer software Converting to the new system

Implementation Activities Question Which of the following statements is not true: a. A preliminary investigation of a current system is conducted by the steering committee. b. Implementation, follow-up, and maintenance of IT includes acquiring resources for the new system. c. In designing an AIS, the design team will begin with outputs. d. The more work done during planning and analysis, the less likely the new system will fail.

Managing IT Implementation Projects Two tools to help manage projects: PERT (program evaluation and review technique) useful project management tool to help managers identify critical paths to recognise areas where slack time occurs. Gantt charts are useful for scheduling and tracking the activities of systems implementation projects for indicating progress directly on the Gantt chart in contrast to the planned progress.

Managing IT Implementation Projects Question Which of the following statements is not true with respect to managing IT projects: a. Program evaluation and review technique (PERT) allows management to determine the shortest time it will take to implement a new system, and any slack time that might exist between implementation activities. b. An advantage of PERT is that it allows managers to identify the critical path in implementation. c. Both PERT and Gantt charts are manual techniques used in managing IT implementations. d. Gantt charts are useful in scheduling and implementing IT because they allow you to indicate actual progress versus planned progress directly on the chart.

Post-Implementation Review Reevaluation of the new system’s effectiveness by Checking with personnel about satisfaction with the new system. Talking with end users to ascertain their satisfaction. Evaluating the control procedures of the system Observing employee work performance to determine efficiency Evaluating effectiveness of computer processing functions Determining schedules for both internal and external reports are met with the new computer system.

System Maintenance System maintenance continues the tasks created by the initial follow-up study, except that experts from the company’s IT subsystem now perform the modifications exclusively. The IT subsystem is responsible to respond to errors and anomalies in the system estimate the cost of fixing them, and perform the necessary modifications.

System Maintenance The IT departments have forms for such requests, policies for prioritizing maintenance tasks, and formulas for allocating maintenance costs among the various departments.

System Maintenance Organizations spend Maintenance about 20 to 30 percent on developing and implementing the remaining 70 to 80 percent on further modifications or software updates. Maintenance is not the most glamorous part of a system cycle but always the most expensive part.

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Chapter 10