1. ACCOUNTING INFORMATION SYSTEMS:
AN OVERVIEW
CMIS

2. Presentation Outline:
The users of AIS
Information Systems
Transaction Processing Cycles
The Internal Control Process
Organization Interaction with IS
The Development of a System

3. I. The Users of Accounting Information Systems:
External Users
Internal Users
“Mandatory vs. Discretionary Information”

4. A. EXTERNAL USERS:

5. B. INTERNAL USERS:

6. C. MANDATORY vs. DISCRETIONARY INFORMATION:

7. II. INFORMATION SYSTEMS:
The term information system suggest the use of computer technology in an organization
Electronic Data Processing (EDP) or Data Processing (DP)
Management Information Systems (MIS)
Decision Support Systems (DDS)
Expert Systems (ES)
Executive Information Systems (EIS)
Accounting Information Systems (AIS)

9. A. ELECTRONIC DATA PROCESSING (EDP) OR DATA PROCESSING (DP)
Use of computer technology to perform an organization’s transaction-oriented data processing.
DP systems serve routine, recurring, general information needs.

10. B. MANAGEMENT INFORMATION SYSTEMS (MIS):

11. C. DECISION SUPPORT SYSTEMS (DSS):
Process data into a decision making format for end users.
DSS process non-routine information requests on an ad hoc basis.
Requires the use of decision models and specialised databases beyond what is in a DP system.

12. D. EXPERT SYSTEMS:
Emulates an experts decision making process to provide a decision
Different from DSS which only provides information for decision making
Two components of the ES are as follows:
Knowledge base: special knowledge that an expert possesses in the decision area
Inference engine: process by which experts make the decision

13. E. EXECUTIVE INFORMATION SYSTEM (EIS):
EIS tailor information to the strategic needs of top level management.
Much of the information used by top-level management come from sources outside the organization: meetings, memos, television, periodicals, social activities

14. F. ACCOUNTING INFORMATION SYSTEMS (AIS):
A computer-based system designed to transform accounting data into information.
Can also include transactions, processing cycles, the use of information technology, and the development of IS

15. III. TRANSACTION PROCESSING CYCLES:
Transaction processing cycles provide a means of viewing the activities of a business:
Revenue cycle
Expenditure cycle
Production cycle
Finance cycle
Financial reporting cycle

16. A. REVENUE CYCLE:
Events related to the distribution of goods and services to other entities and the collection of related payments.

17. B. EXPENDITURE CYCLE:
Events related to the acquisition of goods and services from other entities and the settlement of related obligations

18. C. PRODUCTION CYCLE:
Events related to the transformation of resources into goods and services

19. D. FINANCE CYCLE:
Events related to the acquisition and management of capital funds, including cash.
The treasurer is responsible for the finances of the business.

20. F. FINANCIAL REPORTING CYCLE:
Not an operating cycle
This cycle obtains accounting and operating data from other cycles and processes this data so that financial reports can be prepared
A controller is in charge of the accounting function.

21. IV. THE INTERNAL CONTROL PROCESS:
Since management is far removed from the scene of operations in a large organization, personal supervision of employees is often replaced with various control techniques.
Definition of internal control
The five elements of the internal control process
Segregation of accounting functions
The internal audit function

22. A. DEFINITION OF INTERNAL CONTROL:
The concept of internal control structure is based on two major premises: management responsibility and reasonable assurance regarding the achievement of objectives relating to:
Reliability of financial reporting
Effectiveness and efficiency of operations
Compliance with applicable laws and regulations.

23. B. FIVE ELEMENTS OF THE INTERNAL CONTROL PROCESS
Control environment – Overall values and integrity of organization
Risk assessment – Identification and evaluation of risks
(Potential x Probability = Exposure)
Control activities – activities undertaken to reduce probability of loss due to significant risks

24. (Elements:)
Information and communication – communication information about the control environment and control activities
Monitoring – Keeping watch over and changing internal controls so that they function effectively and efficiently

25. C. SEGREGATION OF ACCOUNTING FUNCTIONS
Segregate the following duties:
Authorization
Record keeping
Custody of assets

26. D. INTERNAL AUDIT FUNCTION
Internal auditing is an independent appraisal function charged with monitoring and assessing compliance with organizational policies and procedures

27. V. ORGANIZATIONAL INTERACTION WITH IS:
The steering committee
End-user computing
Quick response technology

28. A. THE STEERING COMMITTEE
A committee advising the Chief Information Officer that is composed of high-level members of user functions such as manufacturing and marketing.
The committee provides a means by which managers from other areas can influence the information services process.

29. B. END-USER COMPUTING (EUC)
Functional end users do their own information processing activities through an EUC application such as databases that uses a query language feature to generate specific information needed by the end user to make decisions.

30. EUC Problems: Inadequate system development
May solve wrong problem or have poor documentation
Ineffective use of resources
Underutilised equipment or inefficient design
Data integrity and security problems
Inadvertent alteration of data to implement security controls

31. C. QUICK RESPONSE TECHNOLOGY
Just-in time
Web commerce
Electronic data interchange
Extensible business reporting language
Computer integrated manufacturing
Electronic payment systems

32. 1. JUST-IN-TIME
Purchase orders for inventory items are made on a “demand-pull” basis to restock inventory levels
Adds flexibility to meet customer needs and reduces product rework

33. 2. WEB COMMERCE
Provides worldwide availability of products on a single computer
Specially trained CPAs offer the Web Trust seal to sites that meet certain security and privacy criteria

34. 3. ELECTRONIC DATA INTERCHANGE
EDI is the direct computer-to-computer exchange of business documents via communication network
EDI differs from in that EDI messages are created and interpreted by computers without human intervention.
Also makes use of the universal product code (UPC) bar code

35. 4. EXTENSIBLE BUSINESS REPORTING LANGUAGE
XBRL is a language that facilitates the exchange over the Internet of all kinds of business documents and financial statements.
The SEC permits companies to file their financial reports electronically using XBRL format.

36. 5. COMPUTER-INTEGRATED MANUFACTURING (CIM)
Components of CIM typically include computer-aided design (CAD) workstations, real-time production monitoring, order inventory and control systems
Makes use of scanner technology and machine-readable bar codes

37. 6. ELECTRONIC PAYMENT SYSTEMS
Electronic funds transfer (EFT) systems are electronic payment systems in which processing and communication are primarily or totally electronic

38. VI. THE DEVELOPMENT OF SYSTEMS
Blueprinting
System development
Behavioural considerations

39. A. BLUEPRINTING
The company uses generic or industry standard stock blueprints rather than designing its own system

40. B. SYSTEM DEVELOPMENT
A system development project ordinarily consists of three phases: system analysis, design, and implementation.
The procedure attempts to improve information quality , internal control, and minimize costs.

41. SIX STEPS OF SYSTEM APPROACH
Statement of system objectives
Creation of alternatives
System analysis
System design
System implementation
System evaluation

42. C. BEHAVIORAL CONSIDERATIONS
The users of systems should be included throughout the steps of systems development
Users provide valuable input into what is needed and must accept the system that is developed.

43. SUMMARY Five types of IS Five transaction processing cycles
The internal control process
Steering committee and EUC
Quick-response technology
The steps of systems development