1. Accounting Information Systems: An Overview
Chapter 1

2. Overview
An accounting information system (AIS) is a collection of resources, such as people and equipment, designed to transform financial and other data into information.
Accounting information systems perform this transformation whether they are essentially manual systems or thoroughly computerized.

3. Learning Objectives
Understand the related concepts of transaction cycles and internal control structure.
Describe the organizational structure of the information system function in organizations.

4. Learning Objectives
Discuss applications of information technology in organizations.
Characterize the development of information systems.

5. Learning Objective 1
Understand the related concepts of transaction cycles and internal control structure.

6. Information and Decisions
Every organization accepts inputs and transforms them into outputs that take the form of products and services.
Who are the two main users of accounting information?
External users
Internal users

7. Information and Decisions
Who are the external users of accounting information?
stockholders
investors
creditors
government agencies
customers and vendors

8. Information and Decisions
Who are the internal users of accounting information?
managers
There are different information needs and demands at different managerial levels in an organization.

9. Information and Decisions
Top-Level Management
Strategic
Summarization
and Filtration
Middle
Management
Tactical
Operational
Lower-Level
Management
Transaction Oriented

10. Information Systems
The term information system suggests the use of computer technology in an organization.
What is a computer-based information system?
It is a collection of computer hardware and software designed to transform data into useful information.

11. 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)

12. Business Processes
A business process is an interrelated set of tasks that involve data, organizational units, and a logical time sequence.
Business processes are always triggered by some economic event, and all have clearly defined starting and ending points.
Most organizations experience similar types of economic events and activities.

13. Primary Business Processes
Inbound Sales
Logistics
Outbound Sales
Logistics
Operations
Marketing
Service

14. Supporting Business Processes
Procurement
Technology
Development
Human
Resources
Firm
Infrastructure

15. Transaction Processing Cycles
Transaction cycles have traditionally grouped activities of a business into four common cycles of business activities.
Revenue cycle
Expenditure cycle
Production cycle
Finance cycle

16. Transaction Processing Cycles
A fifth cycle is the financial reporting cycle.
The financial reporting cycle is not an operating cycle.
It obtains accounting and operating data from the other cycles and processes these data into financial reports.

17. Internal Control Process
The internal control process is a process designed to provide reasonable assurance regarding the achievement of objectives in:
reliability of financial reporting
effectiveness and efficiency of operations
compliance with applicable laws and regulations

18. Internal Control Process
What are the elements of internal control?
control environment
risk assessment
control activities
information and communication
monitoring

19. Internal Control Process
How does the segregation of duties principle apply to the accounting function?
No individual or department should control the accounting records relating to its own operation.
What is internal auditing?
It is an independent appraisal activity within the organization.

20. Learning Objective 2
Describe the organizational structure of the information system function in organizations.

21. The Information System Function
The information system function is responsible for data processing.
The information system function in organizations has evolved from simple organizational structures to complex structures involving many qualified specialists.

22. The Information System Function
Chief
Information
Officer
Steering
Committee
Manager
Systems
Analysis
Manager
Programming
Manager
Operations
Manager
Technical
Support
Manager
User
Support

23. The Information System Function
Manager
Systems
Analysis
Manager
Programming
Application
Analysts
Application
Programmers

24. The Information System Function
Manager
Operations
Maintenance
Programmers
File
Librarian
Data
Entry
Operators
Computer
Operators

25. The Information System Function
Manager
Technical
Support
Systems
Programmers
Communication
Analysts
Database
Administration

26. The Information System Function
A common variation of the functional form of organization is to structure the analysis and programming functions by project.
In project organizations, analysts and programmers are assigned to specific application projects.

27. Discuss applications of information technology in organizations.
Learning Objective 3
Discuss applications of information technology in organizations.

28. 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 with hardware, software, and professional resources provided by the organization.

29. EUC: Mainframe Application
Database
Accounts Receivable
Data
User Report
Query Language
Processor
User Submits
Query Language
Job
Database
Access Control
Software

30. Data Processing for the End User
Traditional Approach
Information System
Specialists
Data Processing
User

31. Data Processing for the End User
End-User Approach
Database Software or Personal Computer
Data Processing
User

32. Data Processing for the End User
Personal computers (PCs) give end users their own processing power.
Once users have obtained data, they may perform additional processing.

33. Quick-Response Technology
Quick-response systems are essential to the total quality performance (TCP) movement in business.
TQP is also called TQM or total quality management.
It is a philosophy that one should do the right thing right the first time.
TQP emphasizes customer satisfaction.

34. Quick-Response Technology
Several technologies interact to make quick-response systems feasible.
Hardware and software standardization
Electronic data interchange (EDI)
Universal product code (UPC) bar code identification of products and scanning technologies

35. Quick-Response Technology
Retailer’s Computer System
Retail Sale of
Product
Scan Bar Code
Electronic Data
Interchange
Vendor’s Computer System
Ship Order

36. Web Commerce
Sales via the World Wide Web are an integral part of the economy.
What are some benefits?
One benefit for consumers is that there is no waiting in line for a salesperson.
One benefit for merchants is cost savings through automated ordering.

37. Electronic Data Interchange
EDI is the direct computer-to-computer exchange of business documents via a communication network.
What is the difference between EDI and ?
Electronic mail involves messages created and interpreted by human.
EDI involves messages between computers.

38. Electronic Data Interchange
Purchase Order
Retailer
Supplier
Eliminates
Paper
Saves
Time

39. Computer-Integrated Manufacturing
Computer-integrated manufacturing (CIM) is an integrated approach to the use of information technology in manufacturing enterprises.
CIM reduces information costs and, through EDI, brings the producer, the supplier, and the customer closer together.

40. 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

41. Electronic Funds Transfer (EFT)
Electronic funds transfer systems are payment systems in which processing and communication are primarily or totally electronic.
Banks can interface with corporate EDI applications.

42. Characterize the development of information systems.
Learning Objective 4
Characterize the development of information systems.

43. The Accountant and Systems Development
Accountants may undertake systems development activities either internally for their company or externally as consultants.
Systems development activities are often encountered by internal and external auditors during reviews of information systems controls.

44. The Accountant and Systems Development
A systems development project ordinarily consists of three general phases:
systems analysis
systems design
systems implementation

45. The Accountant and Systems Development
Systems analysis involves formulating and evaluating solutions to systems problems.
The emphasis is on the objectives of the entire system under consideration.
Basic to this is an analysis of trade-offs between system objectives.

46. 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

47. The Accountant and Systems Development
Systems design is the process of specifying the details of the solution selected by the systems analysis process.
It includes the evaluation of the relative effectiveness and efficiency of alternative system designs in light of the overall system requirements.

48. The Accountant and Systems Development
Systems implementation is the process of placing the revised or newly designed procedures and methods into operations.
It includes the following:
testing the solution prior to implementation
documenting the solution
reviewing the system

49. 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?

50. Systems Approach Statement of system objective(s)
Creation of alternatives
Systems analysis
Systems design
Systems implementation
Systems evaluation

51. 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.
Technical, behavioral, situational, and personnel factors should be considered.

52. 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.

53. End of Chapter 1