1. The Information System: An Accountant’s Perspective
Chapter 1
The Information System: An Accountant’s Perspective 1

2. Internal & External Information Flows

3. Information Requirements
Each user group has unique information requirements.
The higher the level of the organization, the greater the need for more aggregated information and less need for detail. 6

4. Information in Business
Information is a business resource:
needs to be appropriately managed
is vital to the survival of contemporary businesses 2

5. What is Information?
Information is processed data that is used to make decisions, resolve conflicts, and/or reduce uncertainty. 16

6. What is a System?
A group of interrelated multiple components or subsystems that serve a common purpose
System or subsystem?
A system is called a subsystem when it is viewed as a component of a larger system.
A subsystem is considered a system when it is the focus of attention. 7

7. Examples of Systems E = mc2 Biological Mechanical Others cell
human body
Mechanical
water heater
computer
Others
solar system
mathematics
E = mc2 7

8. What is an Information System?
An information system is the set of formal procedures by which data are collected, processed into information, and distributed to users. 9

9. Information System Objectives in a Business Context
The goal of an information system is to support
the stewardship function of management.
management decision making.
the firm’s day-to-day operations. 19

10. Transactions Financial Transactions User Information Decision System
Making
Information
Nonfinancial
Transactions 10

11. What is Accounting Information Systems?
Accounting is an information system
which identifies, collects, processes, and communicates economic information about an entity to a wide variety of people regardless of the technology
captures and records the financial effects of the firm’s transactions
distributes transaction information to operations personnel to coordinate many key tasks 3

12. AIS vs. MIS?
GLS = General Ledger System  FRS = Financial Reporting System
TPS = Transaction Processing System
MRS = Management Reporting System 11

13. Transforming the Data into Information
Functions for transforming data into information according to the general AIS model:
1. data Collection
2. data Processing
3. data Management
4. information Generation 8

14. Organizational Structure
The structure of an organization helps to allocate
responsibility
authority
accountability
Segmenting by business function is a very common method of organizing. 21

15. Functional Areas Inventory/Materials Management
purchasing, receiving and stores
Production
production planning, quality control, and maintenance
Marketing
Distribution
Personnel
Finance
Accounting
Computer Services 22

16. Organization of Computer Services Function in a Centralized System

17. Organizational Structure for a Distributed Processing System

18. Potential Advantages of DDP
Cost reductions in hardware and data entry tasks
Improved cost control responsibility
Improved user satisfaction since control is closer to the user level
Backup of data can be improved through the use of multiple data storage sites

19. Potential Disadvantages of DDP
Loss of control
Mismanagement of organization-wide resources
Hardware and software incompatibility
Redundant tasks and data
Consolidating tasks usually segregated
Difficulty attracting qualified personnel
Lack of standards

20. The Evolution of IS Models: The Flat-File Model

21. The Evolution of IS Models: The Database Model
Solves the following problems of the flat file approach
no data redundancy - except for primary keys, data is only stored once
single update
current values
task-data independence - users have access to the full domain of data available to the firm
A database is a set of computer files that minimizes data redundancy and is accessed by one or more application programs for data processing.
The database approach to data storage applies whenever a database is established to serve two or more applications, organizational units, or types of users.
A database management system (DBMS) is a computer program that enables users to create, modify, and utilize database information efficiently. 6

22. Accountants as Information System Users
Accountants must be able to clearly convey their needs to the systems professionals who design the system.
The accountant should actively participate in systems development projects to ensure appropriate systems design. 26

23. Accountants as System Designers
The accounting function is responsible for the conceptual system, while the computer function is responsible for the physical system.
The conceptual system determines the nature of the information required, its sources, its destination, and the accounting rules that must be applied. 27

24. Accountants as System Auditors
External Auditors
attest to fairness of financial statements
assurance service: broader in scope than traditional attestation audit
IT Auditors
evaluate IT, often as part of external audit
Internal Auditors
in-house IS and IT appraisal services 28