Accounting Information Systems: An Overview

Chapter 1

2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood

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Learning Objective 1

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

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

Manual
Computerized
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Information and Decisions

Who are the two main users of accounting information? External users

Internal users

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Information and Decisions

Who are the external users of accounting information?

Stockholders
Investors

Creditors
Government agencies Customers and vendors
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Information and Decisions

Hierarchy of Internal Users
Top-Level Management Middle Management Lower-Level Management Strategic Tactical Summarization and Filtration

Operational
Transaction oriented

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

Data
Software

Information

2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood

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

Executive Information System (EIS)

Accounting Information System (AIS)
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Business Processes

Data

Organizational units

Logical time sequence

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

Marketing

Service

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Business Processes
Supporting Business Processes
Technology development

Procurement

Human resources

Firm infrastructure

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Transaction Processing Cycles

1. Revenue cycle 2. Expenditure cycle 3. Production cycle 4. Finance cycle
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Internal Control Process

Reliability of financial reporting

Effectiveness and efficiency

Compliance

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Internal Control Process

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

Segregation of Duties: No individual or department should control the accounting records relating to its own operation. Internal Auditing: It is an independent appraisal activity within the organization.
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Learning Objective 2

Describe the organizational structure of the information system function in organizations.

2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood

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The Information System Function

Chief Information Officer Steering Committee

Manager Systems Analysis

Manager Programming

Manager Operations

Manager Technical Support

Manager User Support

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2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood

The Information System Function

Manager Systems Analysis

Manager Programming

Application Analysts

Application Programmers

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The Information System Function

Manager Operations

Maintenance Programmers
Data Entry Operators

File Librarian

Computer Operators
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2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood

The Information System Function

Manager Technical Support

Systems Programmers

Communication Analysts

Database Administration
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2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood

The Information System Function

Project organizations

Analysts

Programmers

Application projects
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Learning Objective 3

Discuss applications of information technology in organizations.

2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood

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

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EUC: Mainframe Application

Database Accounts Receivable Data

User Report

Query Language Processor

User Submits Query Language Job

Database Access Control Software

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2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood

Data Processing for the End User

Traditional Approach

User

Information System Specialists

Data Processing
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2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood

Data Processing for the End User

End-User Computing Approach

User

Database Software or Personal Computer

Data Processing
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2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood

EUC: Stand-Alone PC Application

Mainframe Data or Report

Personal Computer

User Prepared Data

Report

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

Electronic data interchange (EDI)

Universal product code (UPC) bar code identification of products and scanning technologies

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Quick-Response Technology
Retailers Computer System

Retail Sale of Product

Scan Bar Code

Electronic Data Interchange

Ship Order

Vendors Computer System

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2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood

Web Commerce
Sales via the World Wide Web are an integral part of the economy.

What are some benefits?

Consumers Merchants No waiting in line Cost savings
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2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood

Electronic Data Interchange

Purchase Order

Retailer Eliminates paper

Supplier Saves time

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Extensible Business Reporting Language

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

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Computer-Integrated Manufacturing
What are the components of a CIM system?

Computer-aided design (CAD) workstations

Real-time production monitoring and control systems Order and inventory control system
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Electronic Payment Systems (EFT)

Electronic funds transfer systems are electronic payment systems in which processing and communication are primarily or totally electronic.

Banks can interface with corporate EDI applications.

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Learning Objective 4

Characterize the development of information systems.

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The Accountant and Systems Development

Accountants may undertake systems development activities either internally or externally.

Systems development activities are often encountered by internal and external auditors during reviews of information systems controls.
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The Accountant and Systems Development

Systems analysis
Systems design Systems implementation
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The Accountant and Systems Development

What are the general objectives of systems analysis?

To improve the quality of information

To improve internal control To minimize cost, where appropriate

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The Accountant and Systems Development

Systems design is the process of specifying the details of the solution selected by the systems analysis process.

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The Accountant and Systems Development

Systems implementation is the process of placing the revised or newly designed procedures and methods into operations. Testing the solution prior to implementation

Documenting the solution

Reviewing the system
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Systems Approach
What is the systems approach? It is a general procedure for the administration of a systems project. Its purpose is to assist in the orderly development of effective systems. What are the six steps of the systems approach process?
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Systems Approach
1 2 Statement of system objective(s) Creation of alternatives

3
4

Systems analysis
Systems design

5
6

Systems implementation
Systems evaluation
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2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood

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

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Behavioral Considerations
The user cooperation needed to operate the system successfully should be ensured during the design of a system, not afterward.

A philosophy of user-oriented design fosters a set of attitudes and an approach to systems development that consciously considers the organizational context.
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End of Chapter 1

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