Introduction to FIS 318/618: Financial Systems & Databases Oakland University School of Business Administration Accounting and Finance Joe Callaghan

Introduction Review Syllabus: Review Curricula Review Course Course Website Review Curricula Review Course Review and Critique Traditional AIS

Curriculum: Financial Why Call it FIS and not AIS? AIS has baggage (associated with stovepipe and use of accounting packages) Output of system emphasizes GAAP measures Meaning of “Financial” Inputs are Event/Transaction-based Reporting Emphasis, especially managerial Audit and Control Emphasis Using Financial Databases Not Financial versus Managerial

Curriculum: Information Output of Information System Includes, but not limited to, GAAP financials Emphasize Information for managers Emphasize functional integration Enterprise-wide information Audit and Control Emphasis Relevance versus Reliability Historical versus Future orientation Using Financial Databases

Curriculum: Systems Generic Life-cycle of IPSO framework For Business For AIS For FIS Not narrowly defined Isomorphism between Business and Information systems

Model-Oriented Tool-Enhanced (MOTE) Models as abstractions Technologically independent Tools (software) to implement This course emphasizes tools, laying foundation for downstream courses Tools needed by information-age accountants: Database skills Spreadsheet skills

Generic Stages of the Systems Development Life Cycle Planning Analysis Design Construction

Curriculum General Education, Precore and Core Major Courses A total of 18-19 credit hours, in the following two categories: 1. Required: FIS 318 Introduction to Financial Systems & Databases 3 FIS 431 Analysis of Financial Systems 3 FIS 432 Design of Financial Systems 3 FIS 433 Information Systems Audit & Control (p.26) 3 Total 12

Curriculum (cont.) 2. Two Electives from: FIS 435 Financial Systems Applications 3 Any ACC course at the 300 or 400 level 3 Any MIS course at the 400 level 3 Any Finance course at the 400 level 3 Manufacturing Planning & Control at the 400 level 4 Subtotal 18-19 Free Electives: 4-7 Total credit hours (minimum) 128

Introduction to Financial Systems & Databases Course (M.O.T.E.) Models Tools/ Software Introduction to Financial Systems & Databases Query (SQL) Process ERD REA MS Access MS Excel Compustat Edgar Analysis of Financial Systems Process Data Interaction Designer 9i Designer 9i Designer 9i Design of Financial Systems Designer 9i Designer Information Systems Audit & Control Query ACL IDEA Financial Systems Applications Depends Designer 9i Designer 9i

Course Review Modeling Business Systems IPSO framework Element Business ACC FIS Input materials transact. event Process value-add posting info-add Storage know-how Ledger RDBMS Output products financials info.

Course Review (cont.) Models Type Abstract Implemented Data ERD Access DB Process CRUD Access/Excel Interaction REA Running App.

Modeling A Business Cash Disbursements Cash Receipts $ $ “Suppliers” Enterprise Customers AMP: Raw Materials, Supplies, Labor, Finance, Fixed assets MSC: Marketing Sales Collection Convert: Operations Job Costing

Activity Models: Template for Decomposition of Business Processes (IPSO template) Source: Hollander, Denna & Cherrington, 2000 (adapted) Suppliers AMP Processes Provides Input of Resources to Organization Request input resources Pay for input Customers Provides Finished Goods and Services MSC Processes Supply goods and services Receive payment ORGANIZATION Conversion Processes Add value Data Storage and Retrieval: Relational Database Management System

Relationship between Business Processes, Information Processes and Management Activities AMP Conversion Processes MSC Management Activities Plan Execute & Control Evaluate Manage Business Processes Capture Data Information System Provide Reports RDMS: Data Source: Hollander, Denna & Cherrington, 2000

Managing Business and Information Processes (PEACE) Should Do Do Feedback Control; Evaluate Plan Execute And Trigger Measures Business Rules Business Processes Information System Data Record Data & Convert to Information How to Value Add

Review and Criticisms of the Traditional Accounting System Architecture 1

Traditional AIS Transactions as subset of Business events Analyze in terms of Accounting Equation, usually in terms if Drs and Crs. Journal as limited set of attributes Posting to General Ledger (aggregated at time lag) Trial Balance, Adjustments, ATB, Adjust, Close Produce GAAP Financials

Criticisms of Traditional Accounting Systems They are non-integrated systems in an organization The architecture captures data about a subset of an organization's business events (the accounting transactions) - FILTERED The architecture stores and processes only a limited number of characteristics about these accounting transactions – FILTERED EVEN MORE The architecture captures and stores duplicate data in a highly summarized form - AGGREGATED The architecture stores financial data to satisfy one primary view - ACCOUNTANT’S PERSPECTIVE Data are not recorded and processed in real-time

Accounting Data: A Subset of Business Data (Limited view & limited data) Data that describes Business Events Accounting Data Business Events Accountants filter data General Ledger Limited Output: Views & Formats

Traditional Accounting “Stovepipe” Systems

? Evolution Of AIS Stage 1 Stage 2 Stage 3 Manual Systems Automated Resources: Manual Process: Accounting Cycle Data Stores (Files): Journals & Ledgers Resources: Information Technology Process: Accounting Cycle Data Stores (Flat-Files): Journals & Ledgers ? Objective: Generate financial statements Objective: Generate financial statements

The solution: An event-driven, enterprise-wide information system, sitting on top of a relational database management system

Evolution Of AIS Stage 1 Stage 2 Stage 3 Manual Systems Automated Event-Driven, Enterprise- Wide IT Applications Resources: Manual Process: Accounting Cycle Data Stores (Files): Journals & Ledgers Resources: Information Technology Process: Accounting Cycle Data Stores (Flat-Files): Journals & Ledgers Resources: Information Technology Process: Record, Maintain, Report All Business Event Data of Interest Data Stores (Tables): RBMS Objective: Generate financial statements Objective: Generate financial statements Objective: Support Planning, Executing, Control And Evaluation Activities (PEACE)

Creating Business Value Organizations add value by converting resources to develop and provide the goods and services that customers desire.

Creating Information Value Information Systems add value by converting data to develop and provide the information that information customers desire.

How Can Accountants Add Value In The Information Age? Provide useful information for decision makers who are responsible for planning, executing, controlling or evaluating activities of an organization Help embed information processes in the business processes (to capture and store data about the processes in real time) Help embed controls in the business processes Help management define business rules or policies that shape the nature of its business processes

Managing Organizations: Business & Information Processes PEACE (Management) Plan Execute, And Control Evaluate Business Processes AMP: Acquire, Maintain, Pay for Business Resources Convert: Add value, particularly unique to organization MSC: Market, Sell goods/services, Collect payment Information Processes Record, Maintain, Report