Documente Academic
Documente Profesional
Documente Cultură
HAPTER 1
Accounting Information Systems: An Overview
Romney/Steinbart
INTRODUCTION
Questions to be addressed in this chapter include:
What is the meaning of system, data, and information? What is an accounting information system (AIS)? Why is the AIS an important topic to study? What is the role of the AIS in the value chain? How does the AIS provide information for decision making? What are the basic strategies and strategic positions an organization can pursue?
Romney/Steinbart
Romney/Steinbart
SYSTEMS, DATA, AND INFORMATION Most systems are composed of smaller subsystems . . . . . . and vice versa!
Romney/Steinbart
Romney/Steinbart
SYSTEMS, DATA, AND INFORMATION Goal conflict occurs when the activity of a subsystem is not consistent with another subsystem or with the larger system. Goal congruence occurs when the subsystem s goals are in line with the organization s goals. The larger and more complicated a system, the more difficult it is to achieve goal congruence.
Romney/Steinbart
Romney/Steinbart
SYSTEMS, DATA, AND INFORMATION Information is different from data. Information is data that have been organized and processed to provide meaning to a user. Usually, more information and better information translates into better decisions.
Romney/Steinbart
SYSTEMS, DATA, AND INFORMATION However, when you get more information than you can effectively assimilate, you suffer from information overload.
Example: Final exams week!
When you ve reached the overload point, the quality of decisions declines while the costs of producing the information increases.
Romney/Steinbart
SYSTEMS, DATA, AND INFORMATION Benefits of information - Cost of producing information Value of information
Benefits of information may include: Reduction of uncertainty Improved decisions Improved ability to plan and schedule activities
Romney/Steinbart
SYSTEMS, DATA, AND INFORMATION Benefits of information - Cost of producing information Value of information
Costs may include time and resources spent: Collecting data Processing data Storing data Distributing information to users
Romney/Steinbart
SYSTEMS, DATA, AND INFORMATION Benefits of information - Cost of producing information Value of information
Costs and benefits of information are often difficult to quantify, but you need to try when youre making decisions about whether to provide information.
Romney/Steinbart
Romney/Steinbart
Romney/Steinbart
Romney/Steinbart
Romney/Steinbart
Romney/Steinbart
Romney/Steinbart
Romney/Steinbart
Romney/Steinbart
Romney/Steinbart
SYSTEMS, DATA, AND INFORMATION External users primarily use information that is either:
MANDATORY INFORMATION required by a governmental entity, such as Form 10-K required by the SEC; or ESSENTIAL INFORMATION required to conduct business with external parties, such as purchase orders.
Romney/Steinbart
SYSTEMS, DATA, AND INFORMATION In providing mandatory or essential information, the focus should be on:
Minimizing costs. Meeting regulatory requirements. Meeting minimum standards of reliability and usefulness.
Romney/Steinbart
Romney/Steinbart
SYSTEMS, DATA, AND INFORMATION Internal users primarily use discretionary information. The primary focus in producing this information is ensuring that benefits exceed costs, i.e., the information has positive value.
Romney/Steinbart
WHAT IS AN AIS?
An AIS is a system that collects, records, stores, and processes data to produce information for decision makers. It can:
Use advanced technology; or Be a simple paper-and-pencil system; or Be something in between.
WHAT IS AN AIS?
The functions of an AIS are to:
Collect and store data about events, resources, and agents. Transform that data into information that management can use to make decisions about events, resources, and agents. Provide adequate controls to ensure that the entity s resources (including data) are:
Available when needed Accurate and reliable
Romney/Steinbart
Romney/Steinbart
Romney/Steinbart
WHY STUDY ACCOUNTING INFORMATION SYSTEMS? It s fundamental to accounting. The skills are critical to career success.
Auditors need to evaluate the accuracy and reliability of information produced by the AIS.
Romney/Steinbart
WHY STUDY ACCOUNTING INFORMATION SYSTEMS? It s fundamental to accounting. The skills are critical to career success.
Tax accountants must understand the clients AIS adequately to be confident that it is providing complete and accurate information for tax planning and compliance work.
Romney/Steinbart
WHY STUDY ACCOUNTING INFORMATION SYSTEMS? It s fundamental to accounting. The skills are critical to career success.
In private industry and not-for-profit, systems work is considered the most important activity performed by accountants.
Romney/Steinbart
WHY STUDY ACCOUNTING INFORMATION SYSTEMS? It s fundamental to accounting. The skills are critical to career success.
In management consulting, the design, selection, and implementation of accounting systems is a rapid growth area.
Romney/Steinbart
WHY STUDY ACCOUNTING INFORMATION SYSTEMS? It s fundamental to accounting. The skills are critical to career success. The AIS course complements other systems courses.
Other systems courses focus on design and implementation of information systems, databases, expert systems, and telecommunications. AIS courses focus on accountability and control.
Romney/Steinbart
WHY STUDY ACCOUNTING INFORMATION SYSTEMS? It s fundamental to accounting. The skills are critical to career success. The AIS course complements other systems courses. AIS topics are tested on the new CPA exam.
Makes up about 25% of the Business Environment & Concepts section of the CPA exam.
2008 Prentice Hall Business Publishing Accounting Information Systems, 11/e Romney/Steinbart
WHY STUDY ACCOUNTING INFORMATION SYSTEMS? It s fundamental to accounting. The skills are critical to career success. The AIS course complements other systems courses. AIS topics are tested on the new CPA exam. AIS topics impact corporate strategy and culture.
Romney/Steinbart
Strategy
AIS design is affected by information technology, the organizations strategy, and the organizations culture.
AIS
Information Technology
Romney/Steinbart
Strategy
Information technology affects the companys choice of business strategy. To perform cost-benefit analyses on IT changes, you need to understand business strategy.
2008 Prentice Hall Business Publishing
AIS
Information Technology
Romney/Steinbart
Strategy
Although culture affects the design of the AIS, its also true that the AIS affects culture by altering the dispersion and availability of information.
2008 Prentice Hall Business Publishing
AIS
Information Technology
Romney/Steinbart
ROLE OF THE AIS IN THE VALUE CHAIN The objective of most organizations is to provide value to their customers. What does it mean to deliver value? Let s peek in on a conversation at Joe s pharmacy . . .
Romney/Steinbart
Romney/Steinbart
Romney/Steinbart
Romney/Steinbart
Romney/Steinbart
ROLE OF THE AIS IN THE VALUE CHAIN Value is provided by performing a series of activities referred to as the value chain. These include:
Primary activities Support activities
These activities are sometimes referred to as line and staff activities respectively.
Romney/Steinbart
ROLE OF THE AIS IN THE VALUE CHAIN Value is provided by performing a series of activities referred to as the value chain. These include:
Primary activities Support activities
These activities are sometimes referred to as line and staff activities respectively.
Romney/Steinbart
Romney/Steinbart
Romney/Steinbart
Romney/Steinbart
Operations A pharmaceutical firm will Outbound logistics typically not be repairing its Marketing and sales product (though the product may be periodically reformulated). Service
The pharmaceutical company is more likely to be providing advisory services to pharmacists, etc.
Accounting Information Systems, 11/e Romney/Steinbart
ROLE OF THE AIS IN THE VALUE CHAIN Value is provided by performing a series of activities referred to as the value chain. These include:
Primary activities Support activities
These activities are sometimes referred to as line and staff activities respectively.
Romney/Steinbart
Romney/Steinbart
Romney/Steinbart
ROLE OF THE AIS IN THE VALUE CHAIN Support activities Buying the resources (e.g., include:
materials, inventory, fixed Firm infrastructure assets) needed to carry out the Human resourcesentitys primary activities. In the pharmaceutical company, the purchasing folks are trying to get the best combination of cost and quality in buying chemicals, supplies, and other assets the company needs to run its operations.
Accounting Information Systems, 11/e Romney/Steinbart
Technology Purchasing
ROLE OF THE AIS IN THE VALUE CHAIN Information technology can significantly impact Good AIS value and effectiveness with the efficiency chain: preceding over $1 billion carried which theUPS spends activities are a year onout. information systems resulting in greater An organization s value chain can be higher customer control over delivery, driver the value and lower costs. connected withproductivity,chains of its Bad customers, AIS value chain: distributors. 60 suppliers, tangled integration of over and Limited Brands
incompatible information systems resulted in 400 trailers trying to jam into a 150 trailer lot.
Romney/Steinbart
Pharmaceuticals, Inc. Inbound Logistics Operations Outbound Logistics Marketing & Sales Service
Customer Pharmacy Inbound Logistics Operations Outbound Logistics Marketing & Sales Service
Romney/Steinbart
Pharmaceuticals, Inc. Inbound Logistics Operations Outbound Logistics Marketing & Sales Service
Customer Pharmacy Inbound Logistics Operations Outbound Logistics Marketing & Sales Service
Romney/Steinbart
Pharmaceuticals, Inc. Inbound Logistics Operations Outbound Logistics Marketing & Sales Service
Customer Pharmacy Inbound Logistics Operations Outbound Logistics Marketing & Sales Service
Romney/Steinbart
The linking of these separate value chains creates a larger system known as a supply chain.
Pharmaceuticals, Inc. Inbound Logistics Operations Outbound Logistics Marketing & Sales Service
Customer Pharmacy Inbound Logistics Operations Outbound Logistics Marketing & Sales Service
Romney/Steinbart
ROLE OF THE AIS IN THE VALUE CHAIN There is variation in the degree of structure used to make decisions:
Structured decisions
Repetitive and routine. Can be delegated to lower-level employees. EXAMPLE: Deciding whether to write an auto insurance policy for a customer with a clean driving history.
Romney/Steinbart
ROLE OF THE AIS IN THE VALUE CHAIN There is variation in the degree of structure used to make decisions:
Structured decisions Semistructured decisions
Incomplete rules. Require subjective assessments. EXAMPLE: Deciding whether to sell auto insurance to a customer with a tainted driving history.
Romney/Steinbart
ROLE OF THE AIS IN THE VALUE CHAIN There is variation in the degree of structure used to make decisions:
Structured decisions Semistructured decisions Structured decisions
Non-recurring and non-routine. Require a great deal of subjective assessment. EXAMPLE: Deciding whether to begin selling a new type of insurance policy.
Romney/Steinbart
ROLE OF THE AIS IN THE VALUE CHAIN There is also variation in the scope of a decision s effect:
Occupational control decisions
Relate to performance of specific tasks Often of a day-to-day nature. EXAMPLE: Deciding whether to order inventory.
Romney/Steinbart
ROLE OF THE AIS IN THE VALUE CHAIN There is also variation in the scope of a decision s effect:
Occupational control decisions Management control decisions
Relate to utilizing resources to accomplish organizational objectives. EXAMPLE: Budgeting.
Romney/Steinbart
ROLE OF THE AIS IN THE VALUE CHAIN There is also variation in the scope of a decision s effect:
Occupational control decisions Management control decisions Strategic planning decisions
The what do we want to be when we grow up types of questions. Involves establishing:
Organizational objectives Policies to achieve those objectives
EXAMPLE: Deciding whether to diversify the company into other product lines.
2008 Prentice Hall Business Publishing Accounting Information Systems, 11/e Romney/Steinbart
ROLE OF THE AIS IN THE VALUE CHAIN In general, the higher a manager is in the organization, the more likely he/she is to be engaging in:
Less structured decisions Broader scope (i.e., strategic planning) decisions
Romney/Steinbart
Consequently, they must identify the improvements likely to yield the highest return. This decision requires an understanding of the entity s overall business strategy.
Romney/Steinbart
THE AIS AND CORPORATE STRATEGY Michael Porter suggests that there are two basic business strategies companies can follow:
Product-differentiation strategy Low-cost strategy
Romney/Steinbart
THE AIS AND CORPORATE STRATEGY Michael Porter suggests that there are two basic business strategies companies can follow:
Product-differentiation strategy Low-cost strategy
Romney/Steinbart
THE AIS AND CORPORATE STRATEGY A product-differentiation strategy involves setting your product apart from those of your competitors, i.e., building a better mousetrap by offering one that s faster, has enhanced features, etc.
Romney/Steinbart
THE AIS AND CORPORATE STRATEGY Michael Porter suggests that there are two basic business strategies companies can follow:
Product-differentiation strategy Low-cost strategy
Romney/Steinbart
THE AIS AND CORPORATE STRATEGY A low-cost strategy involves offering a cheaper mousetrap than your competitors. The low cost is made possible by operating more efficiently.
Romney/Steinbart
THE AIS AND CORPORATE STRATEGY Sometimes a company can do both, but they normally have to choose.
Romney/Steinbart
THE AIS AND CORPORATE STRATEGY Porter also argues that companies must choose a strategic position among three choices:
Variety-based strategic position
Offer a subset of the industrys products or services. EXAMPLE: An insurance company that only offers life insurance as opposed to life, health, propertycasualty, etc.
2008 Prentice Hall Business Publishing Accounting Information Systems, 11/e Romney/Steinbart
THE AIS AND CORPORATE STRATEGY Porter also argues that companies must choose a strategic position among three choices:
Variety-based strategic position Needs-based strategic position
Serve most or all of the needs of a particular group of customers in a target market. EXAMPLE: The original Farm Bureau-based insurance companies provided a portfolio of insurance and financial services tailored to the specific needs of farmers.
2008 Prentice Hall Business Publishing Accounting Information Systems, 11/e Romney/Steinbart
THE AIS AND CORPORATE STRATEGY Porter alsosubset ofthat companies must Serve a argues customers who differ from choose a strategicof factors such as geographic others in terms position among three location choices: or size.
EXAMPLE: Satellite Internet services are Variety-based strategic position intended primarily for customers in rural areas Needs-based strategic or cable services. who cannot get DSL position
Romney/Steinbart
THE AIS AND CORPORATE STRATEGY Porter also argues that companies must choose a strategic position among three choices:
Variety-based strategic position Needs-based strategic position Access-based strategic position
These strategic positions are not mutually exclusive and can overlap.
2008 Prentice Hall Business Publishing Accounting Information Systems, 11/e Romney/Steinbart
It s critical to design the organization s activities so they reinforce one another in achieving the selected strategic position. The result is synergy, which is difficult for competitors to imitate.
Romney/Steinbart
Romney/Steinbart
THE AIS AND CORPORATE STRATEGY ThePredictive data analysis (data adopt and AIS should help a company maintain its strategic position.competitive warehousing/mining) adds to
advantage by forecasting future events based on Requires that data be collected about each historical trends. activity. EXAMPLE: You can view forecasts of airfares Requires the collection and integration of both between major airports based on historical trends financial and nonfinancial data. at www.farecast.com.
Romney/Steinbart
Romney/Steinbart
SUMMARY
What we ve learned so far:
The meaning of system, data, and information. What an AIS is. Why it s an important topic to study. What its role is in the value chain. How it provides information for decision making. What are the basic strategies and strategic positions an organization can pursue.
How these interact with the AIS.
Romney/Steinbart