Chapter 1The Information System: An Accountant's

Perspective
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1. - Understand the primary Objectives for 10. System A group of interrelated multiple
information flows within the Chapter 1 components or subsystems that serve a
business environment. common purpose
- Understand the difference
11. system is called a subsystem when it is viewed as
between accounting information
a component of a larger system.
systems and management
information systems. 12. subsystem is considered a system when it is the
- Understand the difference focus of attention.
between Financial transactions and 13. System the process of dividing the system into
non-financial transactions. Decomposition smaller subsystem parts
- Know the general model for
14. System distinct parts are not self-contained
information systems.
Interdependency
- Be familiar with the functional
areas of a business. 15. System they are reliant upon the functioning of
- Understand the stages in the Interdependency the other parts of the system
evolution of information systems. 16. System all distinct parts must be functioning or
- Interdependency the system will fail
Understand the relationship
between the three roles of 17. information is the set of formal procedures by which
accountants in an information system data are collected, processed into
system. information, and distributed to users.

2. Draw the pyramid Internal & External 18. accounting - Accounting activities must be separate
Information Flows independence and independent of the functional areas
maintaining resources.
3. - Horizontal flows of information Internal Information -
- Vertical flows of information Flows Accounting supports these functions with
(2) information but does not actively
4. - downward flows Vertical flows of participate.
- upward flows information (2) -
Decisions makers in these functions
5. upward flows aggregated
require that such vital information be
transaction and
supplied by an independent source to
operations data
ensure its integrity.
6. downward flows instructions, quotas,
19. transaction is a business event.
and budgets
20. Financial economic events that affect the assets
7. Horizontal flows of information used primarily at the
transactions and equities of the organization
operations level to
e.g., purchase of an airline ticket
capture transaction
and operations data 21. Distributed Data Reorganizing the
Processing computer services
8. - Each user group has unique Information
function into small
information requirements. Requirements
information processing
- The higher the level of the (2)
units that are distributed
organization, the greater the need
to end users and
for more aggregated information
placed under their control
and less need for detail.
9. Information is a "business resource" Information in Business
that:
- needs to be appropriately
managed
-
is vital to the survival of
contemporary businesses
22. Centralized Data All data processing 29. Accounting It distributes transaction information
Processing is performed by Information System to operations personnel to
one or more large coordinate many key tasks.
computers housed
30. Accounting process
at a central site
Information Systems -
that serves users
(AIS) financial transactions; e.g., sale of
throughout the
goods
organization.
- nonfinancial transactions that
23. Nonfinancial all other events processed by the directly affect the processing of
transactions organization's information system financial transactions; e.g., addition
e.g., an airline reservation — no of newly approved vendors
commitment by the customer
31. Manual Process Transaction processing, information
24. -database Primary areas: Model processing, and accounting are
administration (4) physically performed by people,
-data processing usually using paper documents.
-systems development
32. Management process
-systems maintenance
Information Systems - nonfinancial transactions that are
25. Accounting It identifies, collects, processes, (MIS) not normally processed by
Information System and communicates economic traditional AIS; e.g., tracking
information about a firm using a customer complaints
wide variety of technologies.
33. -.helps link AIS Manual Process Model is Useful to
26. Accounting It captures and records the courses to other study because:
Information System financial effects of the firm's accounting courses
transactions. - often easier to
understand business
27. - Cost reductions in Potential Advantages of DDP
processes when not
hardware and data (4)
shrouded in
entry tasks
technology
-
- facilitates
Improved cost control
understanding
responsibility
internal controls
- Improved user
satisfaction since 34. Capturing transaction 1. Data Collection
control is closer to the data CRV
user level Recording data onto
- Backup of data can forms
be improved through Validating and editing
the use of multiple the data
data storage sites
35. Batching 2. Data Processing
28. - Loss of control Potential Disadvantages of DDP Classifying BCCCMSST
- Mismanagement of (7) Calculating
company resources Comparing
- Merging
Hardware and software
incompatibility Summarizing
- Redundant tasks and
data Sorting
- Consolidating tasks
usually segregated
- Transcribing
Difficulty attracting
36. Storing 3. Data Management
qualified personnel
Retrieving SRD
- Lack of standards
Deleting
37. Compiling 4. Information Generation 50. accounting Information reliability requires _____
Arranging CAFP independence
Formatting
51. - Transaction AIS Subsystems
Presenting
processing system (3)
38. Accuracy Characteristics of Useful (TPS)
Completeness Information -
Relevance ACRST General Ledger/
Summarization Financial
Timeliness Reporting System
(GL/FRS)
39. Relevance serves a purpose
- Management
40. Timeliness no older than the time period of Reporting System
the action it supports (MRS)
41. Accuracy free from material errors 52. - Currency of Data Redundancy Problems
42. Completeness all information essential to a Information CDDDT
decision or task is present - Data Storage
- Data Updating
43. Summarization aggregated in accordance with
- Data Integration
the user's needs
- Task-Data
44. - the stewardship Information System Objectives in Dependency
function of a Business Context
53. Transaction supports daily business operations
management / The goal of an information
processing system
- management decision system is to support
(TPS)
making
- the firm's day-to-day 54. Data Storage excessive storage costs of paper
operations documents and/or magnetic form

45. responsibility The structure of an organization 55. Data Updating changes or additions must be
authority helps to allocate performed multiple times
accountability : RAA 56. General Ledger/ produces financial statements and
46. Segmenting by business function is a very Financial reports
common method of organizing : Reporting System
-geographical location (GL/FRS)
-product line 57. Management produces special-purpose reports for
-function Reporting System internal use
47. - Accounting Functional Areas (MRS)
- ACDFIMPP 58. Currency of potential problem of failing to update
Computer Services Information all affected files
-
59. Task-Data user's inability to obtain additional
Distribution
Dependency information as needs change
- Finance
- Inventory/Materials 60. Data Sources are financial transactions that enter the
Management information system from internal and
external sources.
-
61. External financial are the most common source of data
Marketing
transactions for most organizations.
- Production
E.g., sale of goods and services,
-
purchase of inventory, receipt of cash,
Personnel
and disbursement of cash (including
48. Inventory/Materials purchasing, receiving and stores payroll)
Management
62. Data Integration separate files are difficult to integrate
49. Production production planning, quality across multiple users
control, and maintenance
63. Internal involve the exchange or movement of 72. IT Auditors evaluate IT, often as part of
financial resources within the organization. external audit
transactions E.g., movement of raw materials into work-in-
73. Internal Auditors in-house IS and IT appraisal
process (WIP), application of labor and
services
overhead to WIP, transfer of WIP into finished
goods inventory, and depreciation of 74. - developing in-house system ways to acquire information
equipment - purchasing of programmed system
system
64. REA model The _______ is an accounting framework for
modeling an organization's 75. - turnkey system ( classification of commercial
- completed) system (3)
economic resources; e.g., assets - backbone system (
- economic events; i.e., affect changes in customized)
resources - vendor-supported system
- economic agents; i.e., individuals and 76. - manual process model information system model
departments that participate in an economic - flat-file model (5)
event - database model
- - REA model
Interrelationships among resources, events - enterprise resource
and agents planning system
65. 1. Data Functions for transforming data into 77. - accountants as information roles of accountant (3)
Collection information according to the general AIS system users
2. Data model: - accountant as system
Processing (4) designer
3. Data - accountant as system
Management auditor
4.
Information
Generation
66. Entity- ________ are often used to model these
relationship relationships
diagrams
(ERD)
67. Accountants - Accountants must be able to clearly convey
as their needs to the systems professionals who
Information design the system.
System - The accountant should actively participate
Users in systems development projects to ensure
appropriate systems design.
68. Accountants The accounting function is responsible for the
as System conceptual system, while the computer
Designers function is responsible for the physical
system.
69. conceptual determines the nature of the information
system required, its sources, its destination, and the
accounting rules that must be applied.
70. External Accountants as System Auditors
Auditors EII
IT Auditors
Internal
Auditors
71. External attest to fairness of financial statements
Auditors assurance service: broader in scope than
traditional attestation audit