A I S 4 0 5 : A c c o u n ti n g I n f orm a tion S y s t em s

Introduction to Accounting
Information Systems
Lecture 1
 Introduction to Accounting
Information Systems
 Appreciate the complex, dynamic environment in
which accounting is practiced.
 Relationship between the Accounting Information
Systems and the organization’s business processes.
 Attributes of quality information.
 Components of an information system
 How information is used for different types of
decisions and at various levels in the organization.
 How the information system supports the
management function.
 Role of accountant in relation to the current
environment for the AIS.
AIS 405 : Lecture 1 2
Tools of Trade

AIS 405 : Lecture 1 3

 Sarbanes-Oxley Act of 2002

Implications for both public and private accountants:

Section 404 (as modified by PCAOB Auditing
Standard No. 5) –
 Management must identify, document, and
evaluate significant internal controls.
 Auditors must report on the effectiveness of the
organization’s system of internal controls.

AIS 405 : Lecture 1 4

 Sarbanes-Oxley Act of 2002 . . .

Implications for both public and private accountants:

Section 409 –
 Requires disclosure to the public on a
“rapid and current” basis of material changes in an
organization’s financial condition.

AIS 405 : Lecture 1 5

 CICA 2009 Top Ten IT Issues
1. Maintaining adequate controls during the recession
2. Maintaining security over moving data
3. Lack of effective IT governance
4. Coping with information overload
5. Impact of IFRS on Information Systems
6. Green computing
7. Security requirements of the Payment Card Industry
8. Malicious activity by laid-off employees
9. Role of Web 2.0 applications in organizational
information systems
10. Shortage of IT skills
AIS 405 : Lecture 1 6
 Business Environment

Industry
Objectives The Company
Competitors
Strategies

Technologies
Measurements

People Value Chain Products Economic

Capital Forces
Technology
Structure
Customers

AIS 405 : Lecture 1 7

Value Chain & Five Forces Model

AIS 405 : Lecture 1 8

 Porter’ s Value Chain
VALUE

FIRM INFRASTRUCTURE

HUMAN RESOURCE MANAGEMENT

TECHNOLOGY DEVELOPMENT

PROCUREMENT

INBOUND OPERATIONS OUTBOUND MARKETING

LOGISTICS SERVICE
LOGISTIC & SALES
LOGISTIC

COST MARGIN

AIS 405 : Lecture 1 9

 BUSINESS DRIVERS
BPR, CRM,
SCM, e-Biz, etc.

Business BUSINESS Business

Data BUSINESS Users
CONTEXT
CONTEXT

KNOWLEDGE
KNOWLEDGE PROCESS
PROCESS INTERFACE
INTERFACE

Database
Database Information
Information Processing
Processing Input,
Input, Output
Output
Business
Business Rules, Procedures
Rules, Procedures Location,
Location, Security
Security

Hardware
Hardware Software
Software Networking
Networking

ERP, Object, Mobile,

Collaborative, etc.

TECHNOLOGY DRIVERS
AIS 405 : Lecture 1 10
Elements in the Study of IS / AIS

AIS 405 : Lecture 1 11

 Systems and Subsystems …

 System: a set of interdependent elements that

together accomplish specific objectives. A system
must have organization, interrelationships,
integration, and central objectives.
 Subsystem: a part of a system. Within limits, any
system or subsystem can be divided into its
component parts.

AIS 405 : Lecture 1 12

Systems and Subsystems
INPUT OUTPUT

AIS 405 : Lecture 1 13

Systems and Subsystems . . .

AIS 405 : Lecture 1 14

Systems and Subsystems . . .

AIS 405 : Lecture 1 15

System Decomposition Diagram

AIS 405 : Lecture 1 16

 The Information System (IS)

 An information system (IS) or management

information system (MIS) is a manmade system that
consists of an integrated set of computer-based
and manual components established to collect,
store, and manage data and to provide output
information to users. (Gelinas et al.)

AIS 405 : Lecture 1 17

Information Technology Vs. Information System

 Information Technology (IT): A combination of

computer technology (hardware and software)
with telecommunications technology (data, image,
and voice networks)

 Information System (IS): People, data, processes,

and information technology that interact to collect
data, store, process, and provide as output the
information needed to support and improve
operational, tactical, and strategic activities of an
organization (business).

AIS 405 : Lecture 1 18

Information Technology Vs. Information System

Combinations of Combinations of
hardware, software, hardware, software,
and telecom and telecom
networks use to networks that people
process data build and use to
collect, create, and
distribute useful data
in organizations (for
decision making)
AIS 405 : Lecture 1 19
Functional Model of an Information System

AIS 405 : Lecture 1 20

 Accounting Information System (AIS)

 Accounting information system (AIS) is a specialized

subsystem of the IS.
 Collect, process and report information related to
the financial aspects of business events.
 Often integrated and indistinguishable from the
overall information system.
 Like the IS, the AIS may be divided into components
based on the operational functions supported.
Components are called business processes or AIS
subsystems.

AIS 405 : Lecture 1 21

Business Process in Enterprise Systems

 A business process is a set of related steps or

procedures designed to produce a specific
outcome.

AIS 405 : Lecture 1 22

 Business Process Components

 Information process: portion of the overall IS related

to a particular business process.
 Operations process: man-made system consisting of
the people, equipment, organization, policies, and
procedures whose objective is to accomplish the
work of the organization.
 Management process: man-made system consisting
of the people, authority, organization, policies, and
procedures whose objective is to plan and control
the operations of the organization.

AIS 405 : Lecture 1 23

Business Process Activities (Events)

Define &Trigger
Decision /
Operating
management
events
events

Trigger Trigger

Information
events

AIS 405 : Lecture 1 24

Transforming Data into Information …

AIS 405 : Lecture 1 25

Basic System Model

AIS 405 : Lecture 1 26

Example: Architecture of A Payroll System

AIS 405 : Lecture 1 27

Information Qualities

AIS 405 : Lecture 1 28

 Key Information Qualities

 Validity: information about actual authorized events

and objects.
 Accuracy: correspondence or agreement between
the information and the actual events or objects
that the information represents.
 Completeness: degree to which information
includes data about every relevant object or event
necessary to make a decision and includes that
information only once.

AIS 405 : Lecture 1 29

 Management Decision Making

 Intelligence: Searching the environment for

conditions calling for a decision.
 Design: Inventing, developing, and analyzing
possible courses of action.
 Choice: Selecting a course of action.

AIS 405 : Lecture 1 30

Decision Making Process

AIS 405 : Lecture 1 31

Information Systems in Organization
STRATEGIC EXECUTIVE INFORMATION SYSTEMS

TACTICAL MANAGEMENT INFORMATION SYSTEMS

TRANSACTION PROCESSING SYSTEMS

OPERATIONAL

A F H P S O
C I R R A T
C N O L H
T A D E E
N C S R
C T S
E N

VALUE CHAIN

AIS 405 : Lecture 1 32

 Business Process
Reengineering/Redesign

IT/IS contributes to Business Process

Reengineering / Redesign (BPR) :
 Efficient: Do thing right (cheaper)
 Effective: Do right thing (better)
 Competitive: Do thing differently
(faster/newer)

AIS 405 : Lecture 1 33

Decision-Making in an Organization

AIS 405 : Lecture 1 34

 Decision-Making Levels
in an Organization

 Executive Level
• Long-term decisions (Strategies)
• Unstructured decisions (Competitions)
 Managerial Level
• Decisions covering weeks and months (Tactics)
• Semi-structured decisions (Effectiveness)
 Operational Level
• Day-to-day / repetitive decisions (Operations)
• Structured decisions (Efficiency)

AIS 405 : Lecture 1 35

Management Problem Structure
and Information Requirements

AIS 405 : Lecture 1 36

 Structure of Decisions

 Structured decisions: those for which all three

decision phases (intelligence, design, and choice)
are relatively routine or repetitive.
 Unstructured decisions: those for which none of the
decision phases (intelligence, design, or choice) are
routine or repetitive.
 Semi-structured decisions
 Risk Factors in Judgments: No-risk, risky, high-risk
Decisions

AIS 405 : Lecture 1 37

Horizontal vs. Vertical Information Flows

 Horizontal information flows relate to specific

business events, such as one shipment, or to
individual inventory items. The information moves
through operational units such as sales, the
warehouse, and accounting.
 Vertical information flows service a multi-level
management function from operations and
transaction processing through tactical, operations,
and strategic management.

AIS 405 : Lecture 1 38

Organizational Information Systems

AIS 405 : Lecture 1 39

Operational Level

AIS 405 : Lecture 1 40

 Operational Level

 Day-to-day business processes

 Interactions with customers
 Information systems used to:
• Automate repetitive tasks
• Improve efficiency
 Decisions:
• Structured
• Recurring
• Can often be automated using IS

AIS 405 : Lecture 1 41

Architecture

AIS 405 : Lecture 1 42

 Transaction Processing Systems . . .
 Data Processing
• Online processing
• Batch processing
 Data Input
• Manual data entry
• Semi-automated data entry (bar-code + manual)
• Fully automated data entry (bar-code)

AIS 405 : Lecture 1 43

Managerial Level

AIS 405 : Lecture 1 44

 Managerial Level
 Functional managers
• Monitoring and controlling operational-level
activities
• Providing information to executive level
• Midlevel managers
- Focus on effectively utilizing and deploying resources
- Goal of achieving strategic objectives
 Managers’ decisions
• Semi-structured
• Contained within business function
• Moderately complex
• Time horizon of few days to few months
AIS 405 : Lecture 1 45
Architecture

AIS 405 : Lecture 1 46

Executive Level

AIS 405 : Lecture 1 47

 Executive Level

 The president, CEO, vice presidents, board

of directors
 Decisions
• Long-term strategic issues
• Complex and non-routine problems
• Unstructured decisions
• Long-term ramifications

AIS 405 : Lecture 1 48

Architecture

AIS 405 : Lecture 1 49

 Information Systems
Supporting the Functional Areas

AIS 405 : Lecture 1 50

 Information Systems
that Span Organizational Boundaries

AIS 405 : Lecture 1 51

Information System Stakeholders

AIS 405 : Lecture 1 52

Information System Stakeholders

AIS 405 : Lecture 1 53

 Role of Accountant
in Current Business Environment
 Designer — application of accounting principles,
auditing principles, IS techniques, and systems
development methods to design an AIS.
 User — participate in the AIS design process.
 Auditor — provide audit and assurance services.

AIS 405 : Lecture 1 54