Thesis Paper On Implementation of Accounting Information System of Insurance Industry Sector in Bangladesh

Thesis Paper on Implementation of Accounting Information System of Insurance
Industry sector in Bangladesh
CHAPTER- 01
INTRODUCTION
1.1An overview about Insurance business in Bangladesh.

1.1.1 Information System of Insurance Business.
1.1.2 Important control features for insurance business
include.
1.1.3 Approaches to Topics.
1.2 Objectives of the study.
1.3 Methodology of the study.
1.4 Scope of the study.
1.5 Limitations of the study.

1.1 An overview about Insurance business in Bangladesh

Insurance is a mechanism of transferring risk. Insurance should be treated as a basic human
need in terms of wide range of human activities and situations. The insurance industry of
Bangladesh now consists of 44 General Insurance Companies (non-life) including state
owned Sadharan Bima Corporation and 18 Life Insurance Companies including state owned
Jiban Bima Corporation. The sector is playing a vital role in the economy of the country.
1.1.1 Information System of Insurance Business
The insurance business accounting information system must not only aid the insurance
companies in achieving its basic objective but also incorporate those features necessary to
comply with regulatory requirements. The insurance business accounting information system
includes following areas:
1
2
3
4
Organization
Unique accounting practices
Management information requirements
Accounting controls
1.1.1.1 Organization: The organization of an insurance business depends upon its functions
and services. Most insurance companies are divided into a marketing division, underwriting
division, re-insurance division, claims division and financial division. If the insurance
company offers trust services a trust division is often established.
1.1.1.2 Unique accounting practice: Insurance companies must comply with certain
regulatory requirements and reporting practices.
1.1.1.3 Management Information requirements: Insurance business management needs a
variety of reports and information for both external and internal purposes. Financial
statements are often required by stockholders, the SEC and other regulatory agencies.
For internal purpose, management needs a variety of reports should include a variety of
information reports on marketing activity, underwriting activity, re-insurance activity, claim
activity and financial activities.
1.1.1.4. Accounting controls: Many aspects of insurance accounting are unique. Almost
every piece of paper utilized by insurance company becomes a sources document for the
accounting entry. Such papers include Money Receipts, checks, deposit slips, debit and credit
vouchers. Insurance company process hundreds of source documents each day. As
consequence, it is imperative that insurance companies make posting their books each day.
Assets of insurance companies including cheques, cash.
One of the most important accounting controls is the safeguarding of these assets. Primary
objectives of insurance companys internal control should be to promote dual control over

such cash and cash equivalent assets and to fix responsibilities for recording transactions and
maintaining assets.
1.1.2 Important control features for insurance business include:

Segregating duties among personnel handling assets, recording transactions and
supervision.
Rotating duties among employees.
Requiring that every officer and employee of the employee take full uninterrupted
vacations so that transactions under the control of any one individual may clear.
Exercising dual control over cash and cash equivalent assets by requiring the
authorization, approval or action of two individuals to complete a transaction.
Establishing a strong, independent internal audit department.
1.1.3 Approaches to the Topic

Insurance should be treated as a basic human need over a very wide range of human activities
and situations. Insurance companies need an efficient Accounting Information System that
enables the company to administer and present Insurance services and products effectively.
Insurance companies must maintain an IT based Accounting Information System to survive
in the competitive Insurance market.
During the last twenty years, insurance industry in the developed world has undergone
tremendous change, Deregulation, technological innovation and competition contributed
largely to the developments that took place during the decades. As a result, insurance
information is very much important for the economy. To provide relevant information in time
the insurance sector should have a unified accounting information system. Effective AIS is
essential for data collection, data management, data maintenance, and data control and
information generation of the insurance business. But the information handing units of the
insurance business have not been properly organized. Rules and procedures have not been
properly developed to guide information handling departments. In this situation this thesis
tries to find out the original image of the overall AIS of insurance business of Bangladesh.

1.2 Objectives of the Study

There are two objective of this paper they are:
1.2.1 Board objectives:
The Board objectives of the report are to analyze the concept of Accounting Information
Systems.
To know about the system mainly the insurance companies follow for their Insurance
business operation: manual, computerized and combination of manual and
computerized.
To know about the methods of accounting system they follow in their Insurances:
accrual and combination of accrual and cash.
To know about their overall data control or internal control system: weak, sound or
totally sound.
To know how they provide information to their internal management and external
decision makers.
To know about the satisfaction of the insurance companies about their AIS and
problems of AIS.
1.2.1 Specific objectives:
The Specific objectives are:
To analyze the existing Accounting Information System
To identify the problems of implementing existing system.
To find out the strengths and weaknesses of the process and also the problems
usually face to implement Accounting Information System.
To find out proper solution for the problems of existing AIS.
1.3 Methodology of the study

The study has been conducted through review of the relevant provisions of the applicable
laws, Accounting software, Accounting manual, Reports, Publications etc., Survey,
discussion and interview have also been made.
Primary Data: The various methods which will be used to collect primary data these are:
1. Direct personal investigations.
2. Oral conversions and interviews.
3. Information from colleagues.
4. Survey.

Secondary Data: The various methods of collecting secondary data will be as follows:
1. Published text books, Journals, Research papers, articles, etc.
2. Annual reports of Insurance companies.
3. Insurance Act, Insurance Rules, Securities and Exchanges Commission Rules, Income Tax
ordinance, Accounting manual, Software.
4. Internet.
1.4 Scope of the study

The scope is restricted with AIS of insurance business guided by the relevant laws,
regulations and warranties of the insurance Act 1938, the Insurance Rules 1958, the
Companies Act, 1994, the Securities and Exchange Commission (SEC) Rules 1987,
Bangladesh Accounting Standards (BAS) and other applicable laws and regulations and
prevailing practices.
1.5 Limitations of the study

I had secondary data available; I had to face some limitations while doing this study. These
include:
Time constraints
Misinterpretations
Non accessibility of the company management

CHAPTER- 02
HISTORY OF INSURANCE
INDUSTRY
2.1 Introduction.
2.2 History and Development of Insurance.
2.2.1 Marine Insurance.
2.2.2 Fire Insurance.
2.2.3 Life Insurance.
2.3 Development of Insurance in Bangladesh.

2.1 Introduction
Insurance is a system of spreading the risk of one onto the shoulders of many. Whilst it
becomes somewhat impossible for a man to bear of himself 100% loss to his own property or
interest arising out of an unforeseen contingency, insurance is a method or process which
distributes the burden of the loss on a number of persons within the group formed for this
particular purpose.
2.2 History & Development of Insurance

The origin of insurance is lost in antiquity. However, there is no evidence that insurance in its
present form was practiced prior to the twelfth century. A brief chronological historical
development of the various branches of insurance is given below
2.2.1 Marine Insurance
Marine is the oldest form of insurance and came first in the list. This type of insurance
probably began in northern Italy sometime during the 12th& 13th century and gradually the
concept was rather transferred to or taken over by the United Kingdom. During the 13th /
14th century the Italian merchants went to UK and along with the merchandise carried with
them the trading customs including the concept of marine insurance. Marine insurance as
such was not being practiced as a separate specialized entity during that time since it were the
merchants who used to transact marine insurance business side by side with their general
trading activities.
2.2.2 Fire Insurance:
After marine insurance fire insurance develop in present form. It had been observed in
Anglo-section Guild form for the first time where the victims of the fire hazards were given
personal assistance by providing necessaries of life. It 15 had been originated in Germany in
the beginning of sixteenth century. The fire insurance got momentum in England after the
great fire in 1666 when the fire losses were tremendous.

2.2.3 Life Insurance:
The third in the list of development is the life insurance business. The earliest policy of which
there is a record dates back to 1583. During this period only short term polices were used be
issued meaning that only at the death of the life assured during the term period the money
was to be paid. On survival nothing was payable. In 1693 Halley introduced the mortality
table giving a definite value to risk of death. In 1974, the life Assurance Act was passed in
the British parliament requiring the presence of insurable interest before one could affect a
life policy on the life of another. All these gradually gave life assurance a sound, systematic
and scientific basis as we see in the present day.
2.3 Development of Insurance in Bangladesh

Insurance is not a new idea or proposition to the people of Bangladesh. About half a century
back, during the British rule in the then India, some insurance companies started transacting
insurance business, particularly life in this part of the world. Since 1947 until 1971 insurance
business gained momentum in this part of what was then known as East Pakistan. There were
about 49 companies transacting both life and general insurance business. These companies
were of various origins, Viz, British, Australian, Indian, West Pakistani and East Pakistani.
Except a few companies these were mostly limited liability companies acting under a free
competitive economy. With the emergence of the Peoples Republic of Bangladesh, the
government in order to make available the fruit of liberation to the general mass, nationalized
the insurance industry in 1972 by presidential order no 95 more specially known as the
Bangladesh insurance (Nationalization) order1972.
By virtue of the order, save and except postal life insurance and foreign life insurance
companies (other than the Pakistani companies), all companies and organization transacting
all types of insurance business in this country came under this nationalization. Five insurance
corporations were basically established, Viz.
i) Jatiya Bima Corporation
ii) Teesta Bima Corporation
iii) Karnaphuli Bima Corporation
iv) Rupsa Jibon Bima Corporation
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v) Surma Jiban Bima Corporation
The Jatiya Bima Corporation was not an under writing corporation, actually, it was a central
corporation to supervise and control the activities of the remaining four subsidiary
corporations. As per this order Teesta and Karnaphuli were made responsible for general
insurance business and Rupsa and Surma was made responsible for life insurance business.
All the existing 49 companies were merged with this 4corporation whilst life companies or
the life portion of a composite company joined the Rupsa and Surma, the general companies
or the general portion of a composite company joined the Teesta and Karnaphuli. Formation
of two corporations Although the basic idea behind creating 2 corporations in each main
branch was to encourage competition even under a nationalized system, it was observed soon
that the unnecessary administration expenses for maintaining these two corporations in each
front and are apex institution. Therefore, on 14th May, 1973 the structural arrangement under
nationalization was changed vide act VI 1973.
The previous 5 corporation were abolished and instead 2corporations were established, Viz.
i) Sadharan Bima Corporation for transacting general insurance business only. The two
general insurance corporations were merged under it.
ii) Jibon Bima Corporation
For transacting the life insurance is business only. The two life insurance corporations were
merged under it. In the sector, postal life insurance business and corporation of life business
by foreign companies (other than Pakistan) are still permitted as before.
This is the present structure under which the insurance business in transacted in this country.
Insurance is not altogether a new idea in this country, but somehow it could not flourish
much. Now however, there is enough provision for tapping the untapped resource and
potentialities. During the Pakistan or Pre-Pakistan period this market was basically a
production market dealing only in limited conventional types of insurance business both in
life and general. Consideration used to be missing as to what type of policy would suit best
the requirement of the people. Hence, even though there was tremendous growth prospect, it
never gained momentum in the past. Lake of proper technical know-how of the insurance
personnel and the general ignorance of the public as to the importance of insurance business
were also partly responsible for extremely slow growth of insurance activities in the past.

Also partly responsible extremely slow growth is insurance activities in past. It should be
remembered by the students that the insurance industry had to pass through a number of
difficult during the initial stages after nationalization. However, the handicaps were kept
under constant review by the government on the management of the industry and remedies
are gradually being implements to accelerate the growth and progress.
Year
Establishment / Act
Authority
1 March, 1972
P.O. 19/1972 Adoption of Insurance Act in

Bangladesh
Ministry of Commerce
Bangladesh
8 March, 1972
P.O. 95/1972 Bangladesh Insurance

(nationalization ) order 1972
16 March, 1972

(nationalization ) order 1972
26 March, 1972

(Emergency provision ) order 1972
1 November, 1972

(nationalization & Amendment ) order 1972
30 December,1972
P.O. 30/1972 Bangladesh Insurance corporation

(Dissolution ) order 1972
14 May, 1972
Ordinance 7/73/ Insurance Corporation Ordinance

1973
November, 1973
Bangladesh Insurance Academy
1984
Private Insurance Company Act
After 2008
Govt. Life Insurance in one & private life

Insurance Company is 19.
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CHAPTER- 03
THEORETICAL ASPECTS OF
ACCOUNTING INFORMATION SYSTEM
3.1 Implement an Accounting Information System.

3.2 Interaction with External and Internal Parties.
3.3 Compare Between Data and Information.
3.4 Roles of Accountants with Respect to AIS.
3.5 Enterprise Resource Planning (ERP).
3.6 Development of AIS.
3.7 Classes of Systems.
3.8 File Classifications.
3.9 Record Key.
3.10 Flags.
3.11 File Oriented Approaches.
3.12 Flowchart.
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Theoretical Aspects of Accounting Information System

3.1 Implemention an Accounting Information System
3.1.1 Accounting
It is the principal way of organizing and reporting financial information. It has been called
the language of business.
Accounting and information systems comprise the functional area of business responsible for
providing information to the other areas to enable them to do their jobs and for reporting the
results to interested parties.
To that end, an accounting system is used to identify, analyze, measure, record, summarize,
and communicate relevant economic information to interested parties.
3.1.2 Information
Information is intelligence that is meaningful and useful to persons for whom it is indented.
3.1.3 System
A System is an entity consisting of interacting parts that are coordinated to achieve one or
more common objectives. Systems must possess.
Organization: Transactions-Journals-Ledgers-Financial Statements
Interrelationships: The relationship between Subsidiary ledgers and the General Ledger
Integration: Individual transactions to Financial Statements
Central Objectives: Financial Reports, Budgets, Management Reports
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Organization
Environment
Of the Firm
Information
System
Busi
AIAISSness
Firm
Operational
Organizations
Functions
AIS TransactionCycles
Business
Events from
Operations
System
Fig: The business firm as a system
So, a system is a set of two or more interrelated components that interact to achieve a goal.
3.1.4 Information System

An Information system is a framework in which data is collected, processed, controlled and
managed through stages in order to provide information to users. It evolves over time and
becomes more formalized as a firm grows and becomes more complex. It can be a manual or
computerized system. Firms depend on information systems in order to survive and stay
competitive.
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Hardware
Data
Information
Software
Fig: Information system
3.1.5 Accounting information system

An accounting information system (AIS) is a unified structure within an entity such as
business firm that employs physical resources and other components to transform electronic
data into accounting information, with purpose of satisfying the information needs of variety
users.
Input
Financial
events or
transactions
Processing Output
Through several
accounting functions
Information
through financial
statements
Fig: Accounting information system
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3.2 Interaction with external and internal parties

The AIS interacts with external parties, such as customers, vendors, creditors, and
governmental agencies. The AIS also interacts with internal parties such as employees and
management. The interaction is typically two ways, in that the AIS sends information to and
receives information from these parties.
External
Internal
AIS
Parties
Parties
Fig: AIS Interaction

3.2.1 Components of AIS
AIS consist of five components:
1. The people who operate the system and perform various functions.
2. The procedures both manual and automated, involved collecting, processing, and
storing data about the organizations activities.
3. The data about the organizations business process.
4. The software used to process the organizations data.
5. The information technology infrastructure, including computers, peripheral devices,
and network communications devices.
Together these five components enable AIS to fulfill three important functions in any
organization:
(A) Collecting and storing data about the activities performed by the organization.
(B) Transforming data into information that is useful for making decisions that enable
management to plan, execute, and control activities.
(C) Providing adequate control to safeguard the organizations assets including its data, to
ensure that the data are available when needed and accurate and reliable.
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3.3 Compare between Data and Information

3.3.1 Data
Data refers to any and all kind of the facts that are collected, stored, and processed to produce
information by an information system.
3.3.2 Information
Information is data that have been processed and are meaningful and useful to users. The
terms meaningful and useful are value-laden terms and usually subsume other qualities
such as timeliness, relevance, reliability, consistency, comparability, etc.
3.3.3 Functional Steps in Transforming Data into Information
Data collection - capturing, recording, validating and editing data for
completeness and accuracy.
Data Maintenance/Processing - classifying, sorting, and calculating data.
Data Management - storing, maintaining and retrieving data.
Data Control - safeguarding and securing data and ensuring the accuracy and
completeness of the same.
Information
Generation
interpreting,
reporting,
and
communicating
information.
Storage
Information
Processing
Input
Consumers
Output
Exchange Events
Internal Events
Environmental Events
Data
Fig: The Universal Data Processing Model
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3.3.4 Characteristics that make information useful
Relevance:
Information is relevant if it reduces uncertainty, improves decision
makers ability to make predictions, or confirm or corrects their prior expectations.
Reliability: Information is reliable if it is free from error or bias and accurately
represents the events or activities of the organization.
Completeness: Information is complete if it does not omit important aspects of the
underlying events or activities that it measures.
Timeliness: Information is timely if it is provided in time to enable decision makers to
use it to make decisions.
Understandability: Information is understandable if it is presented in a useful and
intelligible format.
Verifiability: Information is verifiable if two knowledgeable people acting
independently would each produce the same information.
Comparability: Information is comparable if it is presented in a way that can be
compared with that of information of others.
3. 3.5 The AIS and corporate strategy
Strategies and Strategic positions
Michael Porter, world-renowned professor of business at Harvard, argues that there are
basic business strategies that companies can follow.
1. A product differentiation strategy entails adding some features or services to the
product that are not provided by competitors.
2. A low-cost strategy entails striving to be the most efficient producer of a product or
service.
Porter argues that the fundamental choice companies must make involves selecting a specific
strategic position they wish to adopt. He describes three basic strategic positions:
1. A variety-based strategic position involves producing or providing a subset of the
industrys product or services.
2. A need-based strategic position involves trying to serve most or all of the needs of a
particular group of customers.
3. An access-based strategic position involves serving a subset of customers who differ
from other customers in terms of factors such as geographic location or size, which
creates different requirements for serving those customers.
3.3.6 Factors influencing design of the AIS
AIS design is affected by
Information technology
Organizations strategy
Organizations culture
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Organizational
Culture
Strategy
AIS
Information
Technology
Fig: Factors influencing design of the AIS

Through the development of information technology, AIS makes information easily
accessible and widely available for users. Information technology affects the companys
business strategy. The value of IT depends upon how it is used strategically to improve the
organization. AIS aids to develop business strategies implement those strategies and modify
those strategies through new developments in IT. AIS function should be designed in such a
way so that it reflects the value of organizational culture.
Figure shows that the arrow between organizational culture and the AIS is bidirectional i.e. organizations culture influence the design of AIS and the design of AIS also
influence organizations culture by controlling the flow of information within the
organization.
3.3.4 Value chain

The ultimate goal f any business is to provide value to its customers. A business will be
profitable if the value it creates is greater than the cost of producing its products or services.
Value is provided by performing a series of activities referred to as the value chain. These
include:
(A) Primary activities
(B) Support activities
An organizations value chain consists of five primary activities that directly provide value to
its customers:
1. Inbound logistics consists of receiving, storing, and distributing the materials that are
inputs used by the organization to create the services and products that it sells.
2. Operational activities transform inputs into final products or services.
3. Outbound logistics are the activities involved in distributing finished products or
services to customers.
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4. Marketing and sales refers to the activities involved in helping customers to buy the
organizations products or services.
5. Service activities provide post-sale support to customer.
SUPPORT ACTIVITIES
Firm Infrastructure
Human Resources
Technology Development
Purchasing
1. Inbound
logisticsreceiving
and Storing
Materials
2. OperationsManufacturing
Repackaging
3. Outbound
logisticsDistribution
Shipping
4. Marketing
and salesAdvertising
Selling
5. ServiceRepair
Maintenance
PRIMARY ACTIVITIES
Fig: Value chain
Support activities are sometimes referred to as line and staff activities respectively.
Support activities include:
1. Firm infrastructure refers to the accounting, finance, legal support, and general
administration activities that are necessary for any organization to function. The AIS ia part
of the firm infrastructure.
2. Human resources Involves recruiting and hiring new employees, training employees,
Paying employees, and handling employee benefits.
3. Technology refers to activities to improve the products or services (e.g., R&D, Web Site
development).
4. Purchasing buying the resources (e.g., materials, inventory and fixed assets) needed to
Carry out the entitys primary activities.
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3.4 Roles of Accountants With Respect to AIS

Financial accountants- prepare financial information for external decision-making in
accordance with GAAP
Managerial accountants- prepare financial information for internal decision-making
Auditors - evaluate controls and attest to the fairness of the financial statements.
Accounting managers - control all accounting activities of a firm.
Tax specialists - develop information that reflects tax obligations of the firm.
Consultants - devise specifications for the AIS
3.5Enterprise Resource Planning (ERP)

ERP systems are large-scale information systems that impact an organization's AIS. These
systems permeate all aspects of the organization and require technologies such as
client/server and relational databases. Other system types that currently impact AISs are
supply chain management (SCM) and customer relationship management (CRM).
Traditional AISs recorded financial information and produced financial statements on a
periodic basis according to GAAP pronouncements. Modern ERP systems provide a broader
view of organizational information, enabling the use of advanced accounting techniques, such
as activity-based costing (ABC) and improved managerial reporting using a variety of
analytical techniques.
3.6 Development of AIS
The development of AIS includes five basic phases: planning, analysis, design,
implementation, and support. The time period associated with each of these phases can be as
short as a few weeks or as long as several years.
3.6.1 Planning
Planning refers to project management objectives and techniques. The first phase of systems
development is the planning of the project. This entails determination of the scope and
objectives of the project, the definition of project responsibilities, control requirements,
project phases, project budgets, and project deliverables.
3.6.2. Analysis
The analysis phase is used to both determine and document the accounting and business
processes used by the organization. Such processes are redesigned to take advantage of best
practices or of the operating characteristics of modern system solutions. There are three types
of Analysis. These are:
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(A)Data analysis is a thorough review of the accounting information that is currently

being collected by an organization. Current data are then compared to the data that
the organization should be using for managerial purposes. This method is used
primarily when designing accounting transaction processing systems.
(B) Decision analysis is a thorough review of the decisions a manager is responsible for
making. The primary decisions that managers are responsible for are identified on an
individual basis. Then models are created to support the manager in gathering
financial and related information to develop and design alternatives, and to make
actionable choices. This method is valuable when decision support is the system's
primary objective.
(C)Process analysis is a thorough review of the organization's business processes.

Organizational processes are identified and segmented into a series of events that
either add or change data. These processes can then be modified or reengineered to
improve the organization's operations in terms of lowering cost, improving service,
improving quality, or improving management information. This method is
appropriate when automation or reengineering is the system's primary objective.
3.6.3 Design
The design phase takes the conceptual results of the analysis phase and develops
detailed, specific designs that can be implemented in subsequent phases. It involves the
detailed design of all inputs, processing, storage, and outputs of the proposed accounting
system. Inputs may be defined using screen layout tools and application generators.
Processing can be shown through the use of flowcharts or business process maps that define
the system logic, operations, and work flow.
Logical data storage designs are identified by modeling the relationships among the
organization's resources, events, and agents through diagrams. Also, entity relationship
diagram (ERD) modeling is used to document large-scale database relationships. Output
designs are documented through the use of a variety of reporting tools such as report writers,
data extraction tools, query tools, and on-line analytical processing tools. In addition, all
aspects of the design phase can be performed with software tool sets provided by specific
software manufacturers.
Reporting is the driving force behind an AIS development. If the system analysis and
design are successful, the reporting process provides the information that helps drive
management decision making. Accounting systems make use of a variety of scheduled and
on-demand reports. The reports can be tabular, showing data in a table or tables; graphic,
using images to convey information in a picture format; or matrices, to show complex
relationships in multiple dimensions.
There are numerous characteristics to consider when defining reporting requirements.
The reports must be accessible through the system's interface. They should convey
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information in a proactive manner. They must be relevant. Accuracy must be maintained.
Lastly, reports must meet the information processing (cognitive) style of the audience they
are to inform.
Reports are of three basic types: A filter report that separates select data from a
database, such as a monthly check register; a responsibility report to meet the needs of a
specific user, such as a weekly sales report for a regional sales manager; a comparative report
to show period differences, percentage breakdowns and variances between actual and
budgeted expenditures. An example would be the financial statement analytics showing the
expenses from the current year and prior year as a percentage of sales.
Screen designs and system interfaces are the primary data capture devices of AISs and
are developed through a variety of tools. Storage is achieved through the use of normalized
databases that assure functionality and flexibility.
Business process maps and flowcharts are used to document the operations of the
systems. Modern AISs use specialized databases and processing designed specifically for
accounting operations. This means that much of the base processing capabilities come
delivered with the accounting or enterprise software.
3.6.4. Implementation
The implementation phase consists of two primary parts: construction and delivery.
Construction includes the selection of hardware, software and vendors for the
implementation; building and testing the network communication systems; building and
testing the databases; writing and testing the new program modifications; and installing and
testing the total system from a technical standpoint.
Delivery is the process of conducting final system and user acceptance testing;
preparing the conversion plan; installing the production database; training the users; and
converting all operations to the new system.
Tool sets are a variety of application development aids that are vendor-specific and
used for customization of delivered systems. They allow the addition of fields and tables to
the database, along with ability to create screen and other interfaces for data capture. In
addition, they help set accessibility and security levels for adequate internal control within the
accounting applications.
3.6.5 Internal controls and security measures
Security exists in several forms. Physical security of the system must be addressed. In
typical AISs the equipment is located in a locked room with access granted only to
technicians. Software access controls are set at several levels, depending on the size of the
AIS. The first level of security occurs at the network level, which protects the organization's
communication systems. Next is the operating system level security, which protects the
computing environment. Then, database security is enabled to protect organizational data
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from theft, corruption, or other forms of damage. Lastly, application security is used to keep
unauthorized persons from performing operations within the AIS.
Testing is performed at four levels. Stub or unit testing is used to insure the proper
operation of individual modifications. Program testing involves the interaction between the
individual modification and the program it enhances. System testing is used to determine that
the program modifications work within the AIS as a whole. Acceptance testing ensures that
the modifications meet user expectations and that the entire AIS perform as designed.
Conversion entails the method used to change from old AIS to a new AIS. There are
several methods for achieving this goal. One is to run the new and old systems in parallel for
a specified period. A second method is to directly cut over to the new system at a specified
point. A third is to phase in the system, either by location or system function. A fourth is to
pilot the new system at a specific site before converting the rest of the organization.
3.6.6 Support
The support phase has two objectives. The first is to update and maintain the AIS. This
includes fixing problems and updating the system for business and environmental changes.
For example, changes in generally accepted accounting principles (GAAP) or tax laws might
necessitate changes to conversion or reference tables used for financial reporting. The second
objective of support is to continue development by continuously improving the business
through adjustments to the AIS caused by business and environmental changes. These
changes might result in future problems, new opportunities, or management or governmental
directives requiring additional system modifications.
3.7 classes of systems

There are two broad classes of system, to describe below:
Batch systems
Real-time systems
3.7.1 Batch Processing
In batch processing, transaction data are stored in a transaction file until a master-file update
is performed. The storing of transaction data in a transaction file may occur either through
off-line or on-line entry of data.
3.7.2 Real-Time Systems
Process transactions individually at the moment the economic event occurs.
Have no time lag between the economic event and the processing.
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Generally require greater resources than batch processing since they require dedicated
processing capacity; however, these cost differentials are decreasing.
Oftentimes have longer systems development time.
3.7.3 Importance of IT and Computer Networks to Accountants
To use, evaluate, and develop modern AIS, accountants must be familiar with IT.
Computers enable accountants to perform their duties more quickly, accurately, and
consistently than by manual methods.
Software such as electronic spreadsheets aid accountants in analyzing financial
statements and in developing budgets.
3.7.4
Gains from IT for Accountants

Faster processing of transactions and other data.
Greater accuracy in computations of and comparisons with data
Lower cost of processing each transaction.
More timely preparation of reports and other outputs.
More concise storage of data, with greater accessibility when needed.
Wider range of choices for entering data and providing outputs.
Higher productivity for employees and managers, who learn to use computers
effectively in their routine and decision-making responsibilities
3.7.5 Types of Network Architectures

(A) Wide-Area Network (WAN): A WAN is a network that is dispersed over a wider
geographic area than a LAN. It typically requires the use of:
Gateways to connect different types of LANs
ridges to connect same-type LANs
WANs may use common carrier facilities, such as telephone lines, or they may use a Value
Added Network (VAN).
(B) Local-Area Networks (LAN):
A type of distributed network created when two or more linked computers are grouped
within a limited geographical area. LAN can be configured in one of three basic ways:
i) Star configuration: A star configuration is a LAN configured as a star; each device is
directly connected on the central server.
24

Host
Computer
or Server
Fig: The STAR configuration
ii) Ring Configuration: In a LAN configured as ring, each node is directly linked to other
nodes.
Central
Files
Local
Local
Files
Files
Local
Files
Local
Files
Fig: The RING configuration
25

iii) Bus Configurations: In a LAN configured as bus, each device is connected to the
main channel, or bus.
Bus
channel
Host
Computer or
Server
Fig: The BUS configuration
3.7.6 The Network Operating System

In peer-to-peer networks, the Network Operating Software (NOS) is installed in each
user workstation.
In a server network, most of the NOS are installed in the file server and a portion also
resides in each workstation.
To run centralized LAN applications, the NOS installed in the file server interacts
with the NOS and the local operating system installed in the workstation. The client
workstation NOS initiates a request to the file server NOS to load files and programs
into the client workstations RAM.
In a peer-to-peer network, a client NOS initiates a request to another client NOS,
which also functions as a server, to load the requested files and/or programs into
RAM
3.7.7 Enterprise-wide Processing and Data Systems
Enterprise-wide on-line transaction processing systems collect and process missioncritical accounting and operational applications.
Enterprise Resource Planning Systems (ERP) such as SAP R/3 overcomes the
limitations of legacy applications.
Firms typically develop two types of On-line Analytical Processing (OLAP) systems
that supplement ERP or legacy systems.
26

A firm can model the relevant aspects of business events contained within the
business processes allowing for the use of relational database-related query language
commands.
Firms can create a data mart or data warehouse to generate predefined reports for
executives and other managers.
3.7.8 Data Marts and Data Warehouses
Both Data Marts and Data Warehouses organize and store copies of informational
or decision support data.
A Data Mart stores copies of decision support data in a data base for a portion of a
company.
A Data Warehouse stores copies of decision support data in an integrated data base
for an entire enterprise.
As opposed to applications-oriented data in legacy systems, data in a data mart or
warehouse are stored by subject areas (e.g., customers).
Data may be stored in either summarized or raw form.
Both have drill down and data mining features.
3.8 File Classifications

3.8.1 Master files
These contain (semi) permanent data (records) pertaining to entities (people, places, and
things). Accounting related examples include:
General and Subsidiary ledgers.

General ledger master file.
Customer/Accounts Receivable master file.
Vendor/Accounts Payable master file.
Inventory master file.
Employee/Payroll master file.
Open WIP master file.
Standard cost master file.
3.8.2 Transaction files

These contain records pertaining to events currently being processed, such as sales, receipts
of goods, etc.
Transaction files capture detailed transaction data. They are counterparts to general
and special journals in manual systems.
Transaction data are periodically posted to related master file(s) and are then either
purged or archived.
27

Accounting related transaction files include:
General/Special journal file (General ledger).
Sales/Cash receipts file (Accounts receivable).
Receiving/Purchases file, Cash disbursements file (Inventory, Accounts payable).
Inventory issuance file/shipment file/sales file/adjustments file (Inventory).
Payroll/Cash disbursements
3.8.3 Reference files
These contain tables or lists of data needed for making calculations or for checking the
accuracy of input data. e.g., product price tables, customer lists, etc.
3.8.4 History files
These are also called archive files since they contain records pertaining to completed
transactions such as past sales.
3.8.5 Open files
These files record incomplete transactions. Whereas transaction files are purged or
archived at the end of a given period, open files remain indefinitely open. Only
individual records from Open files get purged as the transaction actually occurs or does
not.
3.8.6 Report files
These are derived from records within master or transaction files. e.g., data may be
periodically extracted from the Accounts Receivable master file to construct an aging
schedule.
3.8.7 Backup file
This is a copy of a current file generated so that the original file can be recreated from it.
3.8.8 Suspense file
This is a collection of those records of a transaction file that appear to contain erroneous
or questionable data.
28

3.9 Record-Key
These are data elements within records that serve as sort keys. e.g. Customer-account
number. Two types of keys often used in master and transaction file records are a primary
key and one or more secondary keys.
A Primary key (also called a record key) is the attribute that uniquely identifies a
specific record. They are usually of numeric or alphanumeric modes, e.g. customer
number.
A Secondary key is an attribute other than the primary key and represents an
alternative way to sort or access records in a file, e.g. customer last name.
3.10 Flags
Flags that are symbols or characters used for control purposes, e.g. end-of-batch flag.
Flags are not visible to the end-user. It is a system-managed field that is transparent
to the user.
3.11 File-Oriented Approach

3.11.1 File-Oriented Approach to Data Storage
In the file-oriented approach to data storage computer applications maintain their
own set of files.
This traditional approach focuses on individual applications, each of which has a
limited number of users, who view the data as being owned by them.
3.11.2 Deficiencies of the File-Oriented Approach
Files and data elements used in more than one application must be duplicated, which
results in data redundancy.
As a result of redundancy, the characteristics of data elements and their values are
likely to be inconsistent.
Outputs usually consist of preprogrammed reports instead of ad-hoc queries provided
upon request. This results in inaccessibility of data.
Changes to current file-oriented applications cannot be made easily, nor can new
developments be quickly realized, which results in inflexibility.
It is difficult to represent complex objects using file processing systems.
3.11.3 The Database Approach to Data Storage

A database is a set of computer files that minimizes data redundancy and is accessed
by one or more application programs for data processing.
The database approach to data storage applies whenever a database is established to
serve two or more applications, organizational units, or types of users.
29

A database management system (DBMS) is a computer program that enables users to
create, modify, and utilize database information efficiently.
3.11.4 Data Dictionary
A data dictionary is a computer file that maintains descriptive information about the
items in a database.
Each computer record of the data dictionary contains information about a single data
item used in AIS.
Examples of information that might be stored in a data dictionary are source
document(s) used to create the data item, programs that update the data item and
classification information about the items length and data type
3.11.5
Advantages of the Database Approach

Efficient use of computerized storage space.
Each subsystem has access to the others information.
All application programs utilize the same computer file, thereby simplifying
operations.
Fewer backup files for security purposes.
Relieves some users from data-gathering responsibilities in situations where these
users previously gathered their own data.
3.11.6 Disadvantages of the Database Approach
Databases can be expensive to implement because of hardware and software costs
Additional software, storage, and network resources must be used.
A DBMS can only run in certain operating environments, which makes some
unsuitable for certain alternate hardware/operating system configurations.
Because it is radically different from the file-oriented approach, the database approach
may cause initial inertia, or complications and resistant.
3.11.6 Data-Flow Diagrams
A data-flow diagram shows the physical and logical flows of data through a transaction
processing system without regard to the time period when each occurs.
3.12 Flowcharts
Flowcharts include three types:
Document flowcharts describe the flow of documents and information between
departments or units.
System flowcharts describe the relationship between inputs, processing, and outputs
for a system.
Program flowcharts describe the sequence of logical operations performed in a
computer program.
30

CHAPTER- 04
ANALYSIS OF ACCOUNTING INFORMATION
SYSTEM OF INSURANCE INDUSTRY IN
BANGLADEH
4.1 Jiban bima Corporation

4.2 American Life Insurance Company
4.3 Pragati Life Insurance Ltd
4.4 Popular Life Insurance Company
4.5 National Life Insurance Company
4.6 Comparative analysis among the insurance company
31

4.1 Jiban Bima Corporation
Accounting Information Systems (AIS) of Jiban Bima Corporation:
Jiban Bimacorporation uses foreign company software for execute their all operation & use
tally software for their regular data. They made an agreement with an American company
toprovide service their customer effectively and efficiently. This graph shows very good
result for this company it indicate that this company is perfectly operatingtheir operation.
JIBAN BIMA COR POR ATION QUALITY

DATA
Over all data Quality
Accuracy
Timeliness
Completeness
Consistency
6
5
4
3
2
1
0
Accuracy
Timeliness
Completeness
Consistency
4.1.1 Top & middle Management Commitment to AIS:

A long-standing question for both IT research and management practice has been: how can IT
be used in organizations to increase firm performance? Top & middle Management have
provided many capabilities that impact business and financial performance, including
enterprise architecture, IT governance, IT metrics, top management engagement, IT-business
alignment, and business and IT unit capabilities. Top & middle Management propose that a
limited number of enterprise commitments are key to maximizing business value from IT.
We demonstrate, via a survey of 5 respondents in publicly traded firms, that these
commitments are positively correlated to Business Impact from IT, which in turn correlates
with higher financial performance.
32

Top & middle Management Commitment to AIS

7
6
5
4
3
2
1
0
Top management
recognize the importance
Middle management
commitment to AIS
Importance
Education and training
DQ controls
Performance
4.1.2 Team work

Businesses often ask employees to complete projects that require they work as a team.
Working together has many benefits, including the possibility to create new friendships, a
sense of group accomplishment and distribution of responsibilities. Conversely, teamwork
also may cause tension and anxiety among employees because of poor communication.
Effective communication can eliminate much of the stress and negative feelings sometimes
associated with working closely as a team. Business owners should encourage their
employees to communicate with one another clearly when working together. This is
especially important for smaller companies, whose employees often must work closely with
one another.
33

Team work
6.2
6
5.8
5.6
5.4
5.2
5
4.8
4.6
4.4
Between different departments and within

departments
Importance
34
Between different professionals, such as, accounting

and IT
Performance

4.1.3 Nature of the Accounting Information Systems
Accounting Information Systems of Jiban Bima Corporation is Intuitive and easy to us. All
users can use the features very easily. Automatically performs as much validation of data as
possible (based on business rules etc). The system of Jiban Bima Corporation is Adequate&
sufficient documentation for people to follow & uses the system. Its user friendly. Ease of
modification / upgrade. But the system is not mature it is now in beta stage. Last three years
they operate this system. The system is up-to-date (adopt new technology): regular. Level of
the integration and system Interpretability is high. Jiban Bima Corporation has Effective data
management approach, such as, centralized database, and data warehouse.
Nature of the Accounting Information Systems

7
6
5
4
3
2
1
0
Importance
Performance
4.1.4 Understanding of the systems and Data Quality

All the employee of jiban bima Corporation is understand importance of data quality
management. They are always prepared & active to improve the overall data quality
appropriate DQ controls, approaches, and adequate processes.
35

Understanding of the systems and DQ

7
6
5
4
3
2
1
0
Understand how the systems work Understand the importance of DQ

(technical competence)
Importance
Understand the usefulness and

usage of information
Performance
4.1.5 Miscellaneous Activity:

Jiban Bima Corporation records all the financial and non-financial data about the
organizations activities via the existing system. And they don't use any another subsystems
are used for collecting non-financial data. they use ERP system. JBC have Transactional web
sites for checking balances, transferring funds, applying for credit cards etc. Exist in the
organization. The organization is involved with on-line commerce science 2011. Accounting
Software is used for the entire activities. Name of the Software (tally) .this the Accounting
Software satisfying all the users. If any malfunction arises then the existing software is
supportive. JBC use networking System only in internal activities. There is a back-up
computer system for their internal activities
36

4.2 American Life Insurance Company

Accounting Information Systems (AIS) of American Life Insurance Company (Met life Alico):
American Life Insurance Company also known as Met life Alico is the world best and
biggest Life insurance company. Alico use their own customize software to keep their all
clients account record. They have huge number of highly talented employee, they collect &
maintained high quality data.
Quality Data American Life Insurance Company

6.2
6
5.8
5.6
5.4
5.2
5
4.8
4.6
4.4
Accuracy
Timeliness
Completeness
American Life Insurance Company
37
Consistency

Management of Alico is committed to establish good accounting information system, to run
their business. They regular train-up their employee. Try to better performance provide for
customers satisfaction.
Management Commitment to AIS

6.2
6
5.8
5.6
5.4
5.2
5
4.8
4.6
4.4
Top management
Middle management
commitment to AIS
Importance
Performance
DQ controls
Column2
4.2.2 Team Work

Team work is very important for an organization. Like other organization Alico has that
facility their employee can work together via using software but employee must have the
authority or have permission to do team work. They even do work between different
departments and within departments or between different professionals, such as, accounting
and IT.
38

Team Work
(Communication):
6.2
6
5.8
5.6
5.4
5.2
5
4.8
4.6
4.4

departments

and IT
Importance
Performance

Accounting Information Systems of American Life Insurance Company (Met life Alico) is
Intuitive and easy to us. All users can use the features very easily. Automatically performs as
much validation of data as possible (based on business rules etc.). The system of Alico is
Adequate & sufficient documentation for people to follow & uses the system. Its very user
friendly. Ease of modification / upgrade. The system is not mature enough. The system is upto-date (adopt new technology): regular. Level of the integration and system Interpretability
is high. Alico has Effective data management approach, such as, centralized database, and
data warehouse.
All the employees of American Life Insurance Company (Met life Alico) are understanding
importance of data quality management. They are always prepared & active to improve the
overall data quality appropriate DQ controls, approaches, and adequate processes. They are
highly trained to bring or maintained Quality data.
39

Understanding of the systems and Data

Quality
7
6
5
4
3
2
1
0

Importance

Performance

American Life Insurance Company (Met life Alico) records all the financial and nonfinancial data about the organizations activities via the existing system. And they don't use
any another subsystems are used for collecting non-financial data. they use ERP system.
Alico have Transactional web sites for checking balances, transferring funds, applying for
credit cards etc. Exist in the organization. The organization is involved with on-line
commerce science 2011. Accounting Software is used for the entire activities. .this the
Accounting Software satisfying all the users. If any malfunction arises then the existing
software is supportive. Alico is used networking System only in internal activities. There is a
back-up computer system for their internal activities
40

41

4.3 Pragati Life Insurance Ltd.

Accounting Information Systems (AIS) of Pragati Life Insurance Ltd:
Pragati Life Insurance is the rewound Life insurance company. Pragati Life Insurance Ltd use
their own customize software by a Bangladeshi software company to keep their all clients
account record. They recorded high quality data form their client.
Quality Data
Pragati Life Insurance Ltd
6.2
6
5.8
5.6
5.4
5.2
5
4.8
4.6
4.4
Accuracy
Timeliness
Completeness
Consistency

Management of Pragati Life Insurance is committed to establish good accounting information
system, to run their business. They regular train-up their employee. To provide the better
performance for the customers satisfaction. They organize regular training for their employee
to bring better output form them.
42


6.2
6
5.8
5.6
5.4
5.2
5
4.8
4.6
4.4
Top management
Middle management
commitment to AIS
Importance
Performance
DQ controls
Column2
4.3.2 Team Work

Like other organization Pragati Life Insurance has that facility their employee can work
together via using software but employee must have the authority or have permission to do
team work. They even do work between different departments and within departments or
between different professionals, such as, accounting and IT. They must have permission
because of security reason.
Team Work
(Communication):
6.2
6
5.8
5.6
5.4
5.2
5
4.8
4.6
4.4

departments

and IT
Importance
43
Performance

Accounting Information Systems of Pragati Life Insurance is Intuitive and easy to use Pragati
Life Insurance pursues this form a local software firm. All employees can use the features
very easily. Automatically performs as much validation of data as possible (based on business
rules etc). The system of Pragati Life Insurance is Adequate & sufficient documentation for
employee to follow & uses the system. Its very user friendly. Ease of modification / upgrade.
The system is not mature enough. The system is up-to-date (adopt new technology): regular.
Level of the integration and system Interpretability is high. Pragati Life Insurance has
Effective data management approach, such as, centralized database, and data warehouse.
Nature of the Accounting Information

Systems
6.2
6
5.8
5.6
5.4
5.2
5
4.8
4.6
4.4
Importance
Performance
All the employees of Pragati Life Insurance are understanding importance of data quality
appropriate DQ controls, approaches, and adequate processes. They are highly trained to
bring or maintained Quality data.
44


Quality
7
6
5
4
3
2
1
0

Importance

Performance

Pragati Life Insurance records all the financial and non-financial data about the
are used for collecting non-financial data. they use ERP system. This the Accounting
supportive. Pragati Life Insurance is using networking System only in internal activities.
There is a back-up computer system for their internal activities
45

4.4 Popular Life Insurance Company

Accounting Information Systems (AIS) of Popular Life Insurance Company:
Popular Life Insurance Companys the rewound Life insurance company.Popular Life
Insurance use their own customize software by a Bangladeshi software company to keep their
all clients account record. They recorded high quality data form their client.
46

Quality Data
7
6
5
4
3
2
1
0
Accuracy
Timeliness
Completeness
Consistency
Popular Life Insurance

Management of Popular Life Insurance is committed to establish good accounting
information system, to run their business. They regular train-up their employee. They
organize regular training for their employee to bring better output form them.

6.2
6
5.8
5.6
5.4
5.2
5
4.8
4.6
4.4
Top management
Middle management
commitment to AIS
Importance
47

Performance
DQ controls

4.4.2 Team Work
Popular Life Insurance has that facility their employee can work together via using software
but employee must have the authority or have permission to do team work and it is for
limited. They even do work between different departments and within departments or
between different professionals, such as; accounting and IT. They must have permission
Team Work
(Communication):
6.2
6
5.8
5.6
5.4
5.2
5
4.8
4.6
4.4

departments
Importance

and IT
Performance

Accounting Information Systems of Popular Life Insurance is Intuitive and easy to use
Popular Life Insurance pursues this form a local software firm. All employees can use the
features very easily. Automatically performs as much validation of data as possible (based on
business rules etc). The system of Popular Life Insurance is Adequate & sufficient
documentation for employee to follow & uses the system. Its very user friendly. Ease of
modification / upgrade. The system is not mature enough. The system is up-to-date (adopt
new technology): regular. Level of the integration and system Interpretability is high. Popular
Life Insurance has Effective data management approach, such as, centralized database, and
data warehouse.
48


Systems
7
6
5
4
3
2
1
0
Importance
Performance

Popular Life Insurance companies all employee of are understand importance of data quality

Quality
7
6
5
4
3
2
1
0

Importance
49
Performance



Popular Life Insurance records all the financial and non-financial data about the
are used for collecting non-financial data. They use ERP system. This the Accounting
supportive. Popular Life Insurance used networking System only in internal activities. There
is a back-up computer system for their internal activities.
50

4.5 National Life Insurance Company

Accounting Information Systems (AIS) of National Life Insurance Company:
National Life Insurance Company is the rewound Life insurance company. National Life
Insurance use their own customize software by a foregin software company to keep their all
clients account record.
Quality Data National
Life Insurance Ltd
7
6
5
4
3
2
1
0
Accuracy
Timeliness
Completeness
Consistency
National Life Insurance

Management of National Life Insurance is committed to establish good accounting
information system, to run their business. They regular train-up their employee. They
organize regular training for their employee.
51


6.2
6
5.8
5.6
5.4
5.2
5
4.8
4.6
4.4
Top management
Middle management
commitment to AIS
Importance
DQ controls
Performance
4.5.2 Team Work

National Life Insurance has that facility their employee can work together via using software
but employee must have the authority or have permission to do team work and it is for
limited user. They even do work between different departments and within departments or
between different professionals, such as, accounting and IT. They must have permission
Team Work
(Communication):
6.2
6
5.8
5.6
5.4
5.2
5
4.8
4.6
4.4

departments
Importance
52

and IT
Performance

Accounting Information Systems of National Life Insurance is easy to use.National Life
Insurance purchases s this form a local software firm. All mployees can use the features very
easily. Automatically performs as much validation of data as possible (based on business
rules etc.). The system of National Life Insurance is Adequate & sufficient documentation
for employee to follow & uses the system. Its very user friendly. NotEase of modification /
upgrade. The system is not mature enough. The system is up-to-date (adopt new technology)
regular. Level of the integration and system Interpretability is high. Popular Life Insurance
has Effective data management approach, such as, centralized database, and data warehouse.

Systems
7
6
5
4
3
2
1
0
Importance
Performance

National Life Insurance companies all employee of are understand importance of data quality
53


Quality
7
6
5
4
3
2
1
0

Importance

Performance

National Life Insurance records all the financial and non-financial data about the
are used for collecting non-financial data. They use ERP system. This the Accounting
Software satisfying all the users. If any malfunction arises then the existing software is not
supportive. National Life Insurance used networking System only in internal activities. There
is a back-up computer system for their internal activities
54

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4.6 Comparative analysis among the insurance company

Life Insurance Company & Jiban Bima Corporation is more effiecient But
National Life
Insurance Company Ltd, Popular Life Insurance Company Ltd and Pragati Life Insurance Ltd
4.6.1 Data quality
Quality information is critical to organizations success in todays highly competitive
environment.
Accounting information systems (AIS) as a discipline within information
systems require high quality data
55

Traditionally, data quality has often been described from the perspective of accuracy.
Nowadays, research and practice indicates that data quality should be defined beyond
accuracy and is identified as encompassing multiple dimensions (Huang et al 1999).
However, there is no single standard data quality definition that has been accepted in the field
(Klein 1998). Before reviewing the literature, the core term of data quality needs to be
clarified. By themselves, information and data are often different, for example, data is a
collection of symbols which signify real world system states and are brought together
because they are considered relevant to some purposeful activity. Information is an objective
commodity carried by symbols and relates to who produced it, why and how it was produced
and its relationship to the real world state it signifies (Shanks & Darke 1999). Although data
and information are different concepts, data quality is often treated as the same as
information quality in some literature and real-world practice.
Therefore, in this research, data quality and information quality are synonymous. The general
definition of data quality is data that is fit for use by data consumers (Huang et al 1999).
Many data quality dimensions have been identified. Commonly identified data quality
dimensions are:
Accuracy: which occurs when the recorded value is in conformity with the actual
value;
Timeliness: This occurs that when the recorded value is not out of date.
Completeness: which occurs when all values for a certain variable are recorded, and
Consistency: which occurs when the representation of the data values, is the same in
all cases (Ballou et al. 1982, 1985, 1987, 1993)
Four other data quality dimensions have been identified (Wang & Strong 1996) that are also
widely accepted:
Intrinsic dimensions define the quality of data in its own right;
Contextual dimensions define data quality within the context of the task at hand;
Accessibility dimensions emphasize the role of information systems in providing

data, and
Re-presentational dimensions define data quality in terms of the presentation and

delivery of data.
56

In our field survey we found that Accuracy, Completeness, Consistency, completness are
avaiable. overall positon of insurance is good. below the graph or current figure of insurance
industry.
OVER ALL QUALITY DATA FR OM AIS

Jiban Bima Corporation
American Life Insurance Company
Popular Life Insurance Company Ltd
National Life Insurance Company Ltd
6
5
5
4
4
3
Accuracy
Timeliness
Completeness
Consistency
This figure show that in all field Accuracy, Completeness, Consistency, completness
American Life Insurance Company & Jiban Bima Corporation are more effiecient But
National Life Insurance Company Ltd, Popular Life Insurance Company Ltd and Pragati Life
Insurance Ltd
57

4.6.2 Top and Middle Management Commitment to AIS
Top management is highly responsible for every decision. The future of an organization is on
their hand. They are commitment to AIS to follow the AIS and take their company ahead.A
long-standing question for both IT research and management practice has been: how can IT
be used in organizations to increase firm performance? Top & middle Management have
provided many capabilities that impact business and financial performance, including
enterprise architecture, IT governance, IT metrics, top management engagement, IT-business
alignment, and business and IT unit capabilities. Top & middle Management propose that a
limited number of enterprise commitments are key to maximizing business value from IT.
We demonstrate, via a survey of 5 respondents in publicly traded firms, that these
commitments are positively correlated to Business Impact from IT, which in turn correlates
with higher financial performance.
TOP & MI DDLE MA N A GEMEN T

COMMI TMENT TO A I S
J I B A N B I MA
C O R P O R AT I O N
Importance
perfomance
A M E R I C A N L I FE
I N S U R A NC E
C OMP ANY
N A T I O N A L L I FE
I N S U R A NC E
C OMP ANY L TD
58
P O P U L A R L I FE
I N S U R A NC E
C OMP ANY L TD
P R A G A T I L I FE
I N S U R A NC E L T D

4.6.3 Education and Trainig Providing by Company
American Life Insurance Company and Jiban Bima Corporation, National Life Insurance
Company Ltd, Popular Life Insurance Company Ltd and Pragati Life Insurance Ltd, all this
insurance company are organize or give opportunity to take training inside or outside of the
organization. Initially the trains up every single employee under training period.
4.6.4 Nature of the Accounting Information System:

Nature Accounting Information Systems of Life Insurance companies is Intuitive and easy to
use all Insurance purchases software form foreign or local software firm. all most every
software feature can use every Employeee very easily. most software Automatically performs
Nature Of The Accounting Information

System
5.1
5
4.9
4.8
4.7
4.6
4.5
4.4
4.3
4.2
4.1
4
4.68
4.585
4.4
Jiban Bima
Corporation
4.37
American Life
Na tiona l Life
Popula r Life
Ins urance CompanyIns ura nce Compa nyIns ura nce Compa ny
Ltd
Ltd
Importance
Pra ga ti Life
Ins ura nce Ltd
Performance
as much validation of data as possible (based on business rules etc.). The system of Life
Insurance companies is Adequate & sufficient documentation for employee to follow & uses
the system. those are very user friendly. Ease of modification / upgrade. all systems are not
mature enough but its ok to use . all most all of them The system is up-to-date (adopt new
technology): regular. Level of the integration and system Interpretability is high. every
Insurance company has Effective data management approach, such as, centralized database,
and data warehouse.
59

4.6.5 Team Work ( Communication ) Betweeen or within Department:
All insurance American Life Insurance Company &JibanBima Corporation, National Life
Insurance Company Ltd, Popular Life Insurance Company Ltd and Pragati Life Insurance Ltd
use their own or purchases software & all morden software have limited of full access to
doing work as a team. American Life Insurance Company has a great feature of their
sotfware for doing team work.
Team work ( communication )

5
5
4.58
4.16
JIBAN BIMA
CORPORATION
4.58
4.16
AMERICAN LIFE
INSURANCE
COMPANY
NATIONAL LIFE
INSURANCE
COMPANY LTD
Importance
POPULAR LIFE
INSURANCE
COMPANY LTD
PRAGATI LIFE
INSURANCE LTD
Performance
4.6.6 Understanding of the systems and data quality:

Success of an organization is deepened on how the employees understand their work & their
working quality, ability & off course which element they use. if they use perfect data &
understand the system then the work will be done with good output. all insurance company
employee are same in Understanding of the systems and data quality.
60

Understanding of the systems and data quality

6
5
4
3
2
1
0
Jiban Bima
Corporation
American Life
National Life
Popular Life
Pragati Life Insurance
Insurance Company Insurance Company Insurance Company
Ltd
Ltd
Ltd
Importance
Performance
4.6.7 Miscellaneous Activity

Financial data items are database objects that are used to store or calculate financial data
values. There are two types of financial data items:
Stored financial data items, which are used to store values
Formula financial data items, which are used to calculate values
Enterprise resource planning (ERP) systems integrate internal and external management of
information across an entire organizationembracing finance/accounting, manufacturing,
sales and service, customer relationship management, etc. ERP systems automate this activity
with an integrated software application. ERP facilitates information flow between all business
functions inside the organization, and manages connections to outside stakeholders Enterprise
resource planning (ERP) system is usedby every Insurance company.
Online commerce :The buying and selling of products and services by businesses and
consumers through an electronic medium, without using any paper documents. E-commerce
is widely considered the buying and selling of products over the internet, but any transaction
that is completed solely through electronic measures can be considered e-commerce. E61

commerce is subdivided into three categories: business to business or B2B (Cisco), business
to consumer or B2C (Amazon), and consumer to consumer or C2C (eBay). Also called
electronic commerce.except jibon bima corporateion or Alico all other insurance company all
other insurance company not have online system.
All insurance use software but not every single software are stable some of are in beta stage
some of our purchases from in foreign company. Those software must have the mail ware
protection but some company not perfect because are in trail or beta stage.
miscellaneous activity
14
12
10
8
6
4
2
0
Jiban Bima
Corporation
American Life
National Life
Popular Life
Insurance Company Insurance Company Insurance Company
Ltd
Ltd
Service
Not available
62
Pragati Life
Insurance Ltd

CHAPTER- 05
MAJOR FINDINGS &
RECOMMENDATIONS
5.1 Major Findings
5.2 Recommendations
63

5.1 Major Findings

Insurance companies mainly give emphasis on organizational control, other control likedocumentation control and data center controls are neglected. Increase of internal and
external reporting has some lacking.
In Bangladesh the most of insurance companies do not developed partial applications and IT
based program system. AIS are most important part of the company to easily used data,
records, etc. Insurance companies are not developed or growing up to AIS based or
computerized. They still used a combination of manual way and computer system.
The lacks of knowledge of AIS to insurance companys stuffs are that they couldnt use to
proper program of the computer. Most of the stuffs arent train up and not adequate. Do not
update their official website, do not gather proper information by their website.
Insurance industry sector are not developing between banking sector and others financial
sectors. Dont develop to insurance company in rural site. Urban site is mostly developing.
The lack of training problem in stuffs, inadequate educated etc.
64

5.2Recommendations
The Insurance companies should develop their overall AIS. Insurance companies in
Bangladesh life or general have a partial application of IT based modern effective AIS. The
companies are used foregin, local firms, and self or individual developed computer software
mainly for operational purpose. But in fact the insurance companies have not yet developed
unified AIS in their operating system. The operators of AIS of insurance sector have not yet
gathered appropriate & adequate knowledge about the IT based AIS. They still use a
combination of manual and computerized system., the functions of AIS are running on with
little efforts and less satisfactory results particularly for data control and information
generation. They should give more emphasis on internal control and information generation.
The use of internet technology for sale of insurance products and providing swift & better
service is now a well-established activity in many countries, but its use in the insurance sector
of Bangladesh is very limited. Even some companies have no own website.
The growth of insurance sector of Bangladesh mainly depends on aware of people about
insurance products & services and it is possible only through an effective IT based AIS. AIS
related professionals and staffs should be educated and properly trained. Existing AIS
practice under the insurance Act 1938 and the Insurance Rules 1958 should be modernized.
The management of Insurance Companys should development and implement a modern
latest language base software through an established software developing firms for its IT
based effective AIS. It should also recruit IT knowledge people to run the IT based AIS and
provide sufficient training to the employees engaged in different levels of its operating
system. Through the effective AIS, the company will be able to provide its services to the
stakeholders in the better ways and be capable to achieve its main objects efficiently.
According to the requirement of IT based AIS, the regulatory authorities and professional
bodies of insurance sector of Bangladesh should give emphasis to develop the AIS of the
sector immediately.
65

CHAPTER- 06
CONCLUSION
66

The Accounting Information System (AIS) of the insurance sector of Bangladesh is in the
primitive stage. The insurance companies are used a combined system of manual and
computerized system. Accounting information system of the insurance companies condition
is good. All of the insurance companies are active and strong. Nature Accounting Information
Systems of Life Insurance companies is Intuitive and easy to use all Insurance purchases
software form foreign or local software firm. All most every software feature can use every
Employee very easily. Most software automatically performs as much validation of data as
possible (based on business rules etc). The system of Life Insurance companies is Adequate
& sufficient documentation for employee to follow & uses the system. Those are very user
friendly. Ease of modification / upgrade. All systems are not mature enough but its ok to use.
all most all of them The system is up-to-date (adopt new technology): regular. Level of the
integration and system Interpretability is high. Every Insurance company has Effective data
management approach, such as, centralized database, and data warehouse. Those insurance
company use secure network for their own work but all of them don't have online facility, ecommerce.
All insurance use software but not every single software are stable some of are in beta stage
some of our purchases from in foreign company. Those software must have the malware
protection but some company not perfect because are in trail or beta stage.
Finally the insurance sector of Bangladesh should proceed with an effective and enrich AIS.
67

CHAPTER- 07
REFERENCES
68

BOOK:
Romney/ Steinbart, 10th Edition, 2006, Accounting Information System.
INTERNET:
http://www.bangladesh-bank.org/fnansys/regulator.php (August 22, 2014 Time: 11:30
PM)
http://www.sbc.gov.bd/current_market.php (August 22, 2014 Time: 11: 45pm)
http://www.scribd.com/search?query=report+on+AIS+of+insurance+industry+sector
+in+bangladesh (August23, 2014 Time: 12:00 Pm)
69

Thesis Paper On Implementation of Accounting Information System of Insurance Industry Sector in Bangladesh

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Industry sector in Bangladesh

1.1An overview about Insurance business in Bangladesh.