Chapter 1: Accounting Information Systems and the Accountant What Are Accounting Information Systems (AIS)? What’s New in AIS? Accounting and IT Careers in AIS

What is a system? Name some examples of systems… What do these examples have in common?

Socio-technical systems (STS) model views organizational work systems as 2 jointly interacting work systems: the social and the technical (Bostrom, 1980). Structure Technology People Tasks Social Technical System System Inputs The outputs of the system are the result of joint interactions between these two systems Outputs

What is an information system? More than just the technology the collection of computer hardware and software, procedures, documents, forms, and people responsible for the capture, movement, management and distribution of data and information.

Accounting Information Systems An Accounting Information System (AIS) Data and processing procedures Creates needed information for users AIS Today Financial and non-financial data Enterprise-wide information system Business process focused

Information (versus Data) Raw facts No organization or meaning Beginning of audit trail Information Processed data Meaningful to users

AIS Components

Computerized Data Processing Problems Information overload for users Unable to identify input errors Difficult to follow audit trails

AIS and ERP Overlapping of the Systems Provide same information Emphasize business processes Integration into seamless databases

Study Break #1 Which of the following is likely to be information rather than data? Sales price Customer number Net profit Employee name

Study Break #1 - Answer Which of the following is likely to be information rather than data? Sales price Customer number Net profit Employee name

Study Break #2 With respect to computerized AIS, computers: Turn data into information in all cases Make audit trails easier to follow Cannot catch mistakes as well as humans Do not generally process information more quickly than humans

Study Break #2 - Answer With respect to computerized AIS, computers: Turn data into information in all cases Make audit trails easier to follow Cannot catch mistakes as well as humans Do not generally process information more quickly than humans

What’s New in AIS? Cloud Computing Sustainability Reporting Suspicious Activity Reporting Forensic Accounting, Governmental Accountants, and Terrorism Corporate Scandals and Accounting

Cloud Computing

Disadvantages of Cloud Computing Reliability of Internet Connection Data Security Measures of Provider Quality of Service Reliability of Service Provider

Sustainability Reporting Reporting Nonfinancial Measures Impacts on income, value, or future performance

Suspicious Activity Reporting

Forensic Accounting Forensic Accounting Combines skills of investigation, accounting, and auditing Provides evidence of criminal activity Examples of AIS Uses in Forensic Accounting Identifying and denying financial aid to terrorists Tracing arms and chemical orders to final destination Planning for catastrophic events Controlling cyber terrorism Detecting money laundering and illegal transfers

Corporate Scandals and Accounting Enron (2001) Manipulation of accounting records Understate liabilities and inflate earnings Bernard Madoff (2008) Investment fund manager Ponzi scheme Resulted in billions of dollars in losses

Study Break #3 The Sarbanes-Oxley Act of 2002: Enables U.S. officers to wire tap corporate phones if required Has led to a decrease in the amount of work done by auditors and accountants Forbids corporations from making personal loans to executives Requires the CEO of a public company to take responsibility for the reliability of its financial statements

Study Break #3 - Answer The Sarbanes-Oxley Act of 2002: Enables U.S. officers to wire tap corporate phones if required Has lead to a decrease in the amount of work done by auditors and accountants Forbids corporations from making personal loans to executives Requires the CEO of a public company to take responsibility for the reliability of its financial statements

Accounting and IT

The Accounting Cycle

Financial Accounting Non-Financial Data Real-Time Reporting REA Accounting Resources, Events, and Agents Real-Time Reporting Interactive Data and XBRL Reusable data in multiple applications “Tagging” data

Managerial Accounting Business Intelligence and Dashboards

Auditing Traditional role Present role Evaluate the accuracy and completeness of a corporation’s financial statements Present role Evaluate client’s compliance with HIPAA laws IT evaluations and audits (security, privacy) Management consulting

Taxation Taxation Software Professional Usage Example of AIS Create and evaluate tax strategies Transmit completed forms Professional Usage Research challenging questions Access more up-to-date information Database access

Study Break #5 A dashboard is: A computer screen used by data entry clerks for input tasks A physical device dedicated to AIS processing tasks A summary screen typically used by managers A type of blackboard used by managers to present useful information to others

Study Break #5 - Answer A dashboard is: A computer screen used by data entry clerks for input tasks A physical device dedicated to AIS processing tasks A summary screen typically used by managers A type of blackboard used by managers to present useful information to others

Careers in Accounting Information Systems Traditional Accounting Understanding of accounting and information systems Certified Information Technology Professional Systems Consulting Designing systems and reengineering processes Software and hardware selection Value-added resellers (VARs)

Careers in Accounting Information Systems Certified Fraud Examiner Professional certification Association of Certified Fraud Examiners (ACFE) IT Auditing and Security Risk analysis with Information Systems Aid financial auditors in evaluation of controls Certified Information Systems Auditors (CISAs) Penetration testing

AIS at Work: Consulting Work for CPAs Disaster Recovery Planning Assures continuity of operations Must test plan regularly IT Exposure Viruses and Worms Auditing Standard No. 60 Report lack of disaster plan