2. Accounting Information Systems, 1st Edition
Introduction to AIS
Accounting Information Systems, 1st Edition

3. Study Objectives An overview of business processes
An overview of an accounting information system
The business process linkage throughout the supply chain
The IT enablement of business processes
Basic computer and IT concepts
Examples of IT enablement
The internal control structure of organizations
The importance of accounting information systems to accountants
The relation of ethics to accounting information systems
1. On the topic, “Challenges Facing Financial Accounting,” what did the AICPA Special Committee on Financial Reporting suggest should be included in future financial statements?
Non-financial Measurements (customer satisfaction indexes, backlog information, and reject rates on goods purchases).
Forward-looking Information
Soft Assets (a company’s know-how, market dominance, marketing setup, well-trained employees, and brand image).
Timeliness (no real time financial information)

4. An Introduction To Business Processes
Accounting Information System must identify
Transactions to record,
Capture all details,
Properly process into correct accounts, and
Provide reports externally and internally.
SO 1 An overview of business processes

5. An Introduction To Business Processes
Business Process - a sequence of work steps performed in order to produce a desired result.
Examples:
Completing a sale
Purchasing raw materials
Paying employees
Paying vendors
SO 1 An overview of business processes

6. An Introduction To Business Processes
Four general types of business processes:
1. Revenue Processes (Chapter 8)
a. Sales
b. Sales return
c. Cash collection
SO 1 An overview of business processes

7. An Introduction To Business Processes
Four general types of business processes:
2. Expenditure Processes (Chapters 9 and 10)
a. Purchase
b. Purchase return
c. Cash disbursement
d. Payroll
e. Fixed asset
SO 1 An overview of business processes

8. An Introduction To Business Processes
Four general types of business processes:
3. Conversion Processes (Chapter 11)
a. Planning
b. Resource management
c. Logistics
SO 1 An overview of business processes

9. An Introduction To Business Processes
Four general types of business processes:
4. Administrative Processes (Chapter 12)
a. Capital
b. Investment
c. General ledger
SO 1 An overview of business processes

10. An Introduction To Business Processes
Internal controls are the set of procedures and policies adopted to:
safeguard assets,
check accuracy and reliability of data,
promote operational efficiency, and
encourage adherence to prescribed managerial practices.
SO 1 An overview of business processes

11. An Introduction To Business Processes
Quick Review
When a customer returns goods that were purchased, the business process to accept the return would most likely be a(n)
administrative process
b. conversion process
1. Revenue Processes
a. Sales
b. Sales return
c. Cash collection
c. expenditure process
d. revenue process
SO 1 An overview of business processes

12. The Accounting Information System
Various Business Processes
Exhibit 1-1
SO 2 An overview of an accounting information system

13. The Accounting Information System
Quick Review
Which of the following is least likely to be an output of the accounting information system?
a check
b. a report
c. an invoice
A bar code is usually an input to the accounting information system.
d. a bar code
SO 2 An overview of an accounting information system

14. Business Processes Throughout The Supply Chain
Supply Chain - processes and information flows that involve the movement of materials, funds, and related information through the full logistics process, from the acquisition of raw materials to the delivery of finished products to the end user.
The supply chain includes all:
Vendors
Service providers
Customers
Intermediaries
SO 3 The business process linkage throughout the supply chain

15. Business Processes Throughout The Supply Chain
A simplified Supply Chain for McDonald’s
Exhibit 1-2
SO 3 The business process linkage throughout the supply chain

16. Business Processes Throughout The Supply Chain
Quick Review
Which of the following is not true of the supply chain?
The supply chain includes vendors.
b. The supply chain excludes customers.
c. The supply chain includes information flows.
d. The supply chain includes secondary suppliers.
SO 3 The business process linkage throughout the supply chain

17. IT Enablement of Processes and the AIS
Information Technology - Computers, ancillary equipment, software, services, and related resources as applied to support business processes.
IT Enablement - Using IT systems to enhance efficiency and effectiveness of internal or supply chain processes.
SO 4 The IT enablement of business processes

18. IT Enablement of Processes and the AIS
IT usage accomplishes one or more of the following objectives:
Increased efficiency of business processes
Reduced cost of business processes
Increased accuracy of the data related to business processes
Business Process Reengineering (BPR) is the purposeful and organized changing of business processes to make them more efficient.
SO 4 The IT enablement of business processes

19. IT Enablement of Processes and the AIS
Quick Review
Which of the following is not an objective of IT enablement?
increased accuracy of data
b. reduced cost
c. reduced security problems
d. increased efficiency
SO 4 The IT enablement of business processes

20. Basic Computer and IT Concepts
Basic Computer Data Structures
Smallest unit
Values = zero or one
Data hierarchy:
Bit, or binary digit
Byte
Field
Record
File
Database
One character
Eight bits
One item within record
Example - last name
Set of related fields
Example – employee #, name, pay rate, etc.
Set of related records
Entire collection of files
SO 5 Basic computer and IT concepts

21. Basic Computer and IT Concepts
Quick Review
The correct order of the computer data hierarchy is
byte, bit, record, field, file, database
b. bit, byte, record, field, file, database
c. bit, byte, field, record, file, database
d. bit, byte, field, record, database, file
SO 5 Basic computer and IT concepts

22. Basic Computer and IT Concepts
Relational
Database
Example - relationship in data of a customer having more than one order.
Master File
Example - payroll master file maintains the relatively permanent data to process payroll transactions.
Example - transaction file is processed against the master file, and year-to-date balances are updated in the master file.
Transaction File
SO 5 Basic computer and IT concepts

23. Basic Computer and IT Concepts
File Access and Processing Modes
Sequential access
Random access
Indexed Sequential Access Method (ISAM)
Batch processing
Online processing
Real-time processing
SO 5 Basic computer and IT concepts

24. Basic Computer and IT Concepts
Data Warehouse and Data Mining
Data warehouse
Operational database
Data mining
SO 5 Basic computer and IT concepts

25. Basic Computer and IT Concepts
Quick Review
The process of searching for identifiable patterns in data is called
sequential processing
b. data warehousing
c. data mining
d. real-time processing
SO 5 Basic computer and IT concepts

26. Basic Computer and IT Concepts
Networks and the Internet
Network (two or more computers linked together)
Types important to accounting:
Local Area Network (LAN)
Internet
Extranet
Intranet
SO 5 Basic computer and IT concepts

27. Examples of IT Enablement
E-Business
Encompasses all forms of:
Online electronic trading
Consumer-based e-commerce
Business-to-business electronic trading
Business-to-business process integration
Internal use of IT
Examples, buying:
a book at Amazon.com
clothes at Landsend.com
SO 6 Examples of IT enablement

28. Examples of IT Enablement
Electronic Data Interchange
The intercompany, computer-to-computer transfer of business documents in a standard business format.
Example: Transmit purchase orders, invoices, and payments electronically between trading partners.
SO 6 Examples of IT enablement

29. Examples of IT Enablement
Point of Sale System
A system of hardware and software that captures retail sales transactions by standard bar coding.
Example: Customer
checks out through the cash register,
bar codes are scanned on the items purchased,
prices are determined by access to inventory and price list data,
sales revenue is recorded, and
inventory values are updated.
SO 6 Examples of IT enablement

30. Examples of IT Enablement
Automated Matching
A computer system in which the software matches an invoice to its related purchase order and receiving report.
Example: Ford Motor Company described in text illustrated an automated matching system.
SO 6 Examples of IT enablement

31. Examples of IT Enablement
Evaluated Receipt Settlement (ERS)
An invoice-less system in which computer software completes an invoice-less match that is a comparison of the purchase order with the goods received.
E-Payables and Electronic Invoice
Presentment and Payment (EIPP)
Web-enabled receipt and payment of vendor invoices.
SO 6 Examples of IT enablement

32. Examples of IT Enablement
Enterprise Resource Planning Systems (ERP)
Multi-module software system designed to manage all aspects of an enterprise.
Usually broken down into modules such as
financials,
sales,
purchasing,
inventory management,
manufacturing, and
human resources.
SO 6 Examples of IT enablement

33. Examples of IT Enablement
Quick Review
An IT enabled system for purchasing that is an “invoice-less” system is called a(n)
automated matching system
b. evaluated receipt settlement
c. e-payables
d. point of sale system
SO 6 Examples of IT enablement

34. The Control Environment of Organizations
Risks that impact financial standing:
Assets will be stolen or misused
Errors in accounting data or information
Fraudulent activity
Risks inherent in IT systems, such as
Erroneous input of data
Erroneous processing of data
Computer fraud
Computer security breaches
Hardware or software failure
Natural disasters
SO 7 The internal control structure of organizations

35. The Control Environment of Organizations
Enterprise Risk Management (ERM)
ERM is defined as
. . . a process, effected by an entity’s board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.
SO 7 The internal control structure of organizations

36. The Control Environment of Organizations
Enterprise Risk Management (ERM)
Requires management set policies and procedures related to:
Internal Environment
Objective Setting
Event Identification
Risk Assessment
Risk Response
Control Activities
Information and Communication
Monitoring
SO 7 The internal control structure of organizations

37. The Control Environment of Organizations
Enterprise Risk Management (ERM)
Management should ensure the following types of control structures exist:
Code of ethics (Chapter 3)
COSO accounting internal control structure (Chapter 3)
IT system control structure (Chapter 4)
Corporate governance structure (Chapter 5)
IT governance structure (Chapter 6)
SO 7 The internal control structure of organizations

38. The Control Environment of Organizations
Quick Review
The COSO report written for the purpose of assisting managers in the challenge of managing risk in their organizations is entitled
“Internal Controls—Integrated Framework”
b. “Enterprise Risk Management—Integrated Framework”
c. “Corporate Governance”
d. “IT Governance”
SO 7 The internal control structure of organizations

39. The Accountant’s Role in AIS
Accountants may be
users of the AIS,
part of the design or implementation team of an AIS, and/or
auditors of an AIS.
SO 8 The importance of accounting information systems to accountants

40. The Accountant’s Role in AIS
Quick Review
Accountants have some form of use of the AIS in all but which role?
user
b. programmer
c. auditor
d. designer
SO 8 The importance of accounting information systems to accountants

41. Ethics and the AIS Examples of potential unethical behaviors:
Fraudulent financial reporting
Revenue inflation
Expense account fraud
Inflating hours worked for payroll purposes
Computer fraud
Hacking
Browsing confidential data
SO 9 The relation of ethics to accounting information systems

42. Quick Review Ethics and the AIS
Which of the following is not true of unethical behavior?
The only category of unethical behavior for accountants is inflating revenue.
Accountants are often pressured to help commit or cover up unethical behavior.
Hacking is an unethical behavior that accountants should be concerned about.
An accounting information system can be used to cover up unethical behavior.
SO 9 The relation of ethics to accounting information systems

43. Copyright
Copyright © 2008 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.