Accounting Information Systems

accounting information systems

lacks a well defined body of knowledge

Sarbanes Oxley Act (SOX) of 2002

established new corporate governance regulations and standards for public companies registered with the Securities and Exchange Commission (SEC)

external users

trading partners, stakeholders

information system

set of formal procedures by which data are collected, stored, processed into information and distributed to users

distinction between MIS and AIS

centers on the concept of a transaction: two classes- financial and nonfinancial transactions

transaction

an event that affects or is of interest to the organization and is processed by its information system as a unit of work

three fundamental objectives of information

1. to support the stewardship function of management 2. to support management decision making 3. support the firms day to day operations

financial transaction

an economic event that affects the assets and equities of the organization, is reflected in its accounts, and is measured in monetary terms

nonfinancial transaction

events that do not meet the narrow definition of a financial transactions

AIS 3 subsystems

1. transaction processing system (TPS) 2. general ledger/financial reporting system (GL/FRS) 3. management reporting system (MRS)

transaction processing system

supports daily business operations with numerous reports, documents, and messages for users throughout the organization

general ledger/financial reporting system

produces the traditional financial statements, such as the income statement, balance sheet, statement of cash flows, tax returns, and other reports required by law

management reporting system

provides internal management with special-purpose financial reports and information needed for decision making such as budgets, variance reports, and responsibility reports

MIS

processes nonfinancial transactions that are not normally processed y traditional AIS

nondiscretionary reporting (GL/FRS)

organization has few or no choices in the information it provides much of the info consists of traditional financial statements, tax returns, and other legal documents

discretionary reporting (MRS)

the organization can choose what information to report and how to present it

end users

fall into two general groups: external and internal. external include creditors, stockholders, potential investors, regulatory agencies, tax returns, and other reports that the firm has a legal obligation to produce. internal includes management at every level of the organization, as well as operations personnel, great deal of latitude in the way it meets the needs of internal users.

data

facts which may or may not be processed and have no direct effect on a users actions

information

causes the user to take an action that he or she otherwise could not or would not have taken information is determined by the effect it has on the user, not by its physical form

data sources

financial transactions that enter the information system from either internal or external sources. external financial transactions are the most common form of data

data collection

first operational stage in the information system. objective is to ensure that event data entering the system are valid, complete, and free from material errors. most important stage in the system

data processing

tasks range from simple to complex used for production scheduling applications, statistical techniques for sales forecasting, and posting and summarizing procedures used for accounting applications

database

physical repository for financial and nonfinancial data business data are organized in a logical hierarchy. the levels in the data hierarchy are: attributed, record, and file

data attribute

a logical and relevant characteristic o an entity about which the firm captures data

record

complete set of attributes for a single occurrence within an entity class

file

complete set of record of an identical class

database mgmt. task

involves three fundamental tasks: storage, retrieval, and deletion

information generation

process of compiling arranging formatting and presenting information to users. can be an operational document such as a sales order a structured report o a message on a computer screen.

useful information characteristics (5)

relevance, timeliness, accuracy, completeness, summarization

feedback

form of output that is sent back to the system as a source of data may be internal or external and is used to initiate or alter a process

functional segmentation: segments

derive from the flow of resources through the firm

materials management

objective is to plan and control the materials inventory of the company

materials management sub functions (3)

purchasing, receiving, and stores

production planning

involves scheduling the flow of materials labor and machinery to efficiently meet production needs this requires info about the status of sales orders, raw materials inventory, finished goods inventory, and machine and labor availability

quality control

monitors the manufacturing process at various points to ensure that the finished products meet the firms quality standards. effective quality control detects problems early to facilitate correction action, failure to do so results in excess waste of materials and labor

maintenance

keeps the firms machinery and other manufacturing facilities in running order

accountants two important roles

1. captures and records the financial effects of the economic events that constitute the firms transactions 2. distribute transaction information to operations personnel to coordinate many of their key tasks

reliability

value of information to a use is defined by this. must posses relevance, accuracy, completeness, summarization, and timeliness

accounting independence

information reliability rests heavily on this concept, accounting activities must be separate and independent of functional areas that manage and maintain custody of physical resources

4 information technology functions

1. data processing 2. systems development and maintenance 3. database administration 4. network administration

centralized data processing

all data processing is performed by one or more large computers

distributed data processing (DDP)

users process their transactions locally

commercial software "turnkey systems"

information system custom in house from scratch available for both general accounting and for industry specific applications, sometimes called turnkey because they can often be implemented by the user with little or no modification

systems development life cycle

larger orgs with unique info need often develop custom software through this formal process

enterprise resource planning (ERP)

comprised of thousands of small program modules, chosen modules selected by IT team and configuring system can take may months but the result is a customized system with the advantages of a commercial system

network

collection of interconnected computers and communication devices that allows users to communicate, access data and applications, and share info and resources.

network administration

responsible for the effective functioning of the software and hardware that constitute the organizations network

IT outsourcing

org sells IT resources (hardware software and facilities) to a third party org and then leases back IT services from the vendor for a contract period

cloud computing

a variant of IT outsourcing and is location independent computing whereby shared data centers deliver hosted IT services over the internet the services fall into three categories: software as a service (SaaS), infrastructure as a service (IaaS), and platform as a service (Paas)

accountants unique roles in AIS are (2)

system designers and system auditors

conceptual system

involves specifying the criteria for identifying delinquent customers and the information that needs to be reported, the accountant determines the nature of the info require, its sources, its destination, and the accounting rules that need to be applied

physical system

includes data storage medium to be used and the method for capturing an presenting the information

attest function

external audit is an independent attestation performed by an expert auditor who expresses an opinion regarding the presentation of financial statements. performed by CPAs

test of controls/substantive tests

evidence auditors gather come from two types of tests that they perform: test controls (focused on the systems itself and the controls built into it that reduce the risk of material errors and or fraud) substantive tests (focus on data rather than process)

internal auditing

independent appraisal function established within an org to examine and evaluate its activities as a service to the org