LESSON 2 : AIS ENVIRONMENT

Horizontal flows

used primarily at the operations level to capture transaction and operations data.

Downward flows

budget, quotas, instructions

Upward flows

aggregated transaction and operations data

INFORMATION REQUIREMENTS

The higher the level of organization, the more need for aggregated information and less detail.

Information

business resource that needs to be appropriately managed; and is vital for the survival of contemporary business.

SYSTEM

group of interrelated multiple components or subsystems that serve a common purpose.

system is called subsystem

if it is viewed as a component of a larger system.

subsystem is considered system

it is the focus of attention.

SYSTEM DECOMPOSITION

dividing the system into smaller subsystem parts

SYSTEM INTERDEPENDECY

distinct parts are not self- contained; reliant upon the functioning of the other parts of the system; all distinct parts must be functioning of the system will fail.

INFORMATION SYSTEM

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

Transaction

business event

Financial Transactions

economic events that affect the assets and equities (e.g.purchase)

Nonfinancial transactions

all other events processed by the org’s info system (e.g. reservation)

Accounting is an info system.

·         Identifies, collects, processes, and communicates economic information about a firm using a wide variety of tech.

·         Captures and records the financial effects of the firm’s transactions

·         Distributes information to operations personnels to coordinate many key tasks.

AIS PROCESS

·         Financial transactions

·         Nonfinancial transactions that directly affects the processing of financial transactions

MANAGEMENT INFO SYSTEM

·         Nonfinancial transactions that are not normally processed by traditional AIS

Transaction Processing System (TPS)

supports daily business operations

General Ledger/ Financial Reporting System (GL/FRS)-

produces FS and reports

Management Reporting System (MRS)

produces special-purpose reports for internal use.

DATA SOURCES

financial transactions that enter the information system from internal and external sources.

External financial transactions

·         most common source of data for most org

Internal financial transactions

·         involve the exchange or movement of resources within the organization.

1.     Data Collection

·         Capturing transaction data

·         Recording data onto forms

·         Validating and editing data

2.    Data Processing

·         Classifying, Transcribing, Sorting, Batching

·         Merging, Calculating, Summarizing, Comparing

3.     Data Management

·         Storing, Retrieving, Deleting

4.     Information Generation

·         Compiling, Arranging, Formatting, Presenting

Relevance

serves a purpose

Timeliness

no older than the time period of the action it supports

Accuracy

free from material errors

Completeness

all information essential to a decision or task is present

Summarization

aggregated in accordance with the user’s needs

Distributed Data Processing

Reorganizing the computer services function into small information processing units that are distributed to end users and placed under their control.

Centralized Data Processing

All data processing is performed by one or more large computers housed at a central site that serves users throughout the organization. Primary areas: database administration data processing systems development systems maintenance

Data Storage

excessive storage costs of paper documents and/or magnetic form

Data Updating

changes or additions must be performed multiple times

Currency of Information

potential problem of failing to update all affected files

Task-Data Dependency

user’s inability to obtain additional information as needs change

Data Integration

separate files are difficult to integrate across multiple users

REA MODEL-

an accounting framework for modeling an organization’s economic resources, economic events, and economic agents; interrelationships among Resources, Events, and Agents.

Entity-relationship diagrams (ERD)-

often sed to model these relationships

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.

ACCOUNTANTS AS SYSTEM DESIGNERS-

The accounting function is responsible for the conceptual system, while the computer function is responsible for the physical system.

1.     External Auditors

·         attest to fairness of financial statements

·         assurance service: broader in scope than traditional attestation audit

2.     IT Auditors

·         evaluate IT, often as part of external audit

3.     Internal Auditors

·         in-house IS and IT appraisal services