Chapter 1: Accounting Information Systems and Firm Value

accounting information system (AIS)

A system that records, processes, reports, and communicates the results of business transactions to provide financial and nonfinancial information to make decisions and have appropriate levels of internal controls for those transactions.

automate

The use of technology to replace human labor in automating business processes.

business value

Items, events, and interactions that determine the financial health and well-being of the firm.

Certified Information Systems Auditor (CISA)

The CISA designation identifies those professionals possessing IT audit, control, and security skills. Generally, CISAs will perform IT audits to evaluate the accounting information system’s internal control design and effectiveness.

Certified Information Technology Professional (CITP)

The CITP designation identifies accountants (CPAs) with a broad range of technology knowledge and experience.

Certified Internal Auditor (CIA)

The CIA designation is the certification for internal auditors and is the standard to demonstrate competency and professionalism in the internal auditing field.

customer relationship management (CRM) software

Software used to manage and nurture a firm’s interactions with its current and potential clients. CRM software often includes the use of database marketing tools to learn more about the customers and to develop strong firm-to-customer relationships.

data

Raw facts or statistics that, absent a context, may have little meaning.

discretionary information

Information that is generated according to one’s own judgment.

enterprise system (ES)

A centralized database that collects data from throughout the firm. Commercialized information system that integrates and automates business processes across a firm’s value chain located within and across organizations.

firm infrastructure

Activities needed to support the firm, including the CEO and the finance, accounting, and legal departments.

human resource management

Activities include recruiting, hiring, training, and compensating employees.

inbound logistics

Activities associated with receiving and storing raw materials and other partially completed materials and distributing those materials to manufacturing when and where they are needed.

informate-down

The use of computer technology to provide information about business activities to employees across the firm.

informate-up

The use of computer technology to provide information about business activities to senior management.

information

Data organized in a meaningful way to the user.

information overload

The difficulty a person faces in understanding a problem and making a decision as a consequence of too much information.

information value chain

The overall transformation from a business need and business event to the collection of data and information to an ultimate decision.

mandatory information

Information that is required to be generated or provided by law or regulation.

marketing and sales activities

Activities that identify the needs and wants of their customers to help attract them to the firm’s products and buy them.

operations

Activities that transform inputs into finished goods and services.

outbound logistics

Activities that warehouse and distribute the finished goods to the customers.

procurement

Activities that involve purchasing inputs such as raw materials, supplies, and equipment.

Sarbanes-Oxley Act of 2002 (SOX)

A response to business scandals such as Enron, WorldCom, and Tyco International; requires public companies registered with the SEC and their auditors to annually assess and report on the design and effectiveness of internal control over financial reporting.

service activities

Activities that provide the support of customers after the products and services are sold to them (e.g., warranty repairs, parts, instruction manuals, etc.).

supply chain

The flow of materials, information, payments, and services from raw materials suppliers, through factories and warehouses, all the way to the final customers of the firm’s products.

supply chain management (SCM) software

Software that connects the focal firm with its suppliers. It generally addresses segments of the supply chain, including manufacturing, inventory control, and transportation.

systems analyst

Person responsible for both determining the information needs of the business and designing a system to meet those needs.

technology

Supports value-creating activities in the value chain. These technologies also include research and development to develop new products or determine ways to produce products at a cheaper price.

transform

The use of computer technology to fundamentally redefine business processes and relationships.

value chain

A chain of critical business processes at a company that creates value.