CCT/FNCE 325 – A.I.

S/E-FINANCE

The Course’s Three Themes

The three themes-enterprise systems – e- business, and internal

control –.Enterprise systems integrate the business process and
information from all of the organization’s functional areas ,such as
marketing and sales, cash receipts and purchasing, cash disbursements,
human resources, productions and logistics and business reporting
(including financial reporting). Enterprise resource planning (ERP)
systems are software packages that can be used for the core systems
necessary to support enterprise systems. It is critical that accountants
understand these systems because they will be members of the teams
that will install and operate systems in their organizations. To install an
enterprise system, the business processes must be changed and then
mapped to the enterprise system. A major part of the installation
process is configuring the enterprise system to tailor it to the business
process. As consultants, business process owners, system users, or
auditors, we must understand this business systems and be able to
install use, and audit them.

E-business is the application of electronic networks (including the

Internet) to undertake business process between individuals and
organizations. These processes include interaction between back office
(internal) processes such as distribution, manufacturing, and
accounting; and front office (external) processes, such as those that
connect an organization to its customers and suppliers. E-business has
created entirely new ways of working within and across organizations.
For example, organizations are buying and selling goods and services at
virtual market places, which changes how organizations identify
customers and select vendors. It should change how they determine
the costs of acquiring goods from a vendor and what price(s) they
should charge their customers for their products. Obviously,
accountants need to be aware of the opportunities and risks associated
with this new way of doing business.

Internal control – is a process effected by entity’s board of directors ,

management and other personnel - designed to provide reasonable
assurance regarding achieving objectives in the following categories :
efficiency and effectiveness of operations, reliability of reporting , and
compliance with applicable laws and regulations. For example, controls
ensure that an organization‘s products (its inventory) are not stolen
and that the organization does not have too much inventory ( perhaps,
a waste of resources) or too little inventory (leading, perhaps , to a
lost opportunity to sell the product). Although management is
responsible for an organization’s systems of internal control, the
accountant and other business process owners are given the
responsibility to effect the system of control. Therefore, it is important
that all managers and accountants know how to use controls to ensure
achievements of the organization’s goals.

PART 1: INFORMATION SYSTEMS

An information system is any organized combination of people,
hardware, software, communication networks and data resources
that collect, transform and disseminate information in an
organization. People have relied on information processing
instructions and procedures (software), communication channels
(networks) and stored data (data resources) since the dawn of
civilization.

Types of information systems

- Simple manual systems that use paper and pencil as hardware

devices
- Informal system that use word of mouth as the communication
channel
- Computer based information systems which use computer
hardware and software, the internet and telecommunication
technologies to transform data resources into an endless
variety of information for business users, business
professionals and researchers.

Why study information system technology as a business

student?

Information systems and technologies are a very vital component

of successful business and organizations. They thus constitute an
essential field of study for business majors for them to appreciate
all other functional areas in business including the role of
information systems in organizations.
 What is a system?

A system is a group of interrelated components working together

towards a common goal by accepting inputs and producing
outputs in an organized transformation process. A system’s basic
characteristics are:-

1) In-put –involves capturing and assembling elements that enter

the system to be processed
2) Processing –involves transformation process that convert
input into output
3) Output-involves transferring elements that have been
processed to their ultimate destination
4) Feedback- data about performance of a system e.g data about
the number of transactions being processed per hour.
5) Control- involves monitoring and evaluating feedback to
determine whether a system is moving toward achievement of
its goal. The control function then makes necessary
adjustments to the system’s input and processing aspects to
ensure it produces proper output.

Other characteristics of a system

 Environment: A system does not exist in a vacuum; rather it

exists and functions in an environment containing other
 systems. If a system is one of the components of a larger
system, it is called a sub system and the larger system is the
environment.
 Boundary: It is the limiting factor beyond which the system
cannot operate. It separates a system from other systems and
from the environment.
 Interface: this is a shared boundary by which subsystems are
connected to one another in the same environment.

 Open system: this is a system that freely interacts with other

systems in its environmental.
 Closed system: It only interacts with other systems in a very
limited manner.
 Adaptive system: this is a system that has the ability to change
itself or the environment in order to perform its functions.

COMPONENTS RESOURCES OF AN INFORMATION SYSTEM

A model information system shows there are 5 basic component

resources namely

1. People Resources

a) Specialists -Systems analysts, Software developers and systems

operators.
b) End Users -Anyone else who uses information systems.

2. Hardware resources

a) Machines -Computer, Video monitors, magnetic disk drives,

printers, optical scanners.

b) Media -Floppy disks, magnetic tapes, Optical disks, plastic

cards, paper forms

3. Software Resources

a) Programs – such as Operating system programs, spreadsheet

programs, word processing programs, payroll programs

b) Procedures – such as data entry procedures, error correction

procedures, pay check distribution procedures,

4. Data Resources – such as Product description, customer

records, employee files, inventory databases, e.t.c.

5. Network resources

Communication media, communication processes, network

access and control software

CATEGORIES OF INFORMATION SYSTEMS

Information systems are categorized into two broad types

i) Operation Support System

 These information systems support operations hence the name
operations support systems (business support systems), such
operations include:

 Processing business transactions hence - TPS

 Controlling of industrial processes i.e. Process Control
Systems
 Team and work group collaboration i.e. the enterprise
collaboration systems.

ii) Management Support System

Generally the role of these systems is to provide support for

managerial decision making. They are divided into the following
categories:

- MIS -provide pre-specified reporting for managers

- IDC - Interactive Decision Support
- Executive Information systems: This provides information
tailored for executives
- Knowledge Management Systems; They support the creation,
organization and dissemination of business knowledge within
an enterprise e.g intranet access to best business practices,
sales proposal strategies and consumer problem resolution
systems.
- Strategic information systems
Also called management processes
Provide a firm with information that result in strategic
products, services and capabilities for competitive advantage
e.g online stock trading, shipment tracking
- Function business system
Support a variety of operational and managerial application of
the basic functions of a company e.g information system that
support application in accounting, finance, marketing,
operations management and human resource management.

Categories of computer software

 Application software
 System software

Application software

The application software is further sub-divided into two as

follows:

a) General purpose application software

b) Application - specific software

General Purpose application software

The programs in this category include:-

 a) Software suites
b) Webs browsers
c) Electronic mail
d) Word processing
e) Spreadsheets
f) Database managers
g) Presentation graphics
h) Personal information managers
i) Groupware
a) Software suites
This program contains all other packages together as a bundle,
its packages include:
- Microsoft office
- Corel word-perfect office Lotus smart suite
- Sun's star office
b) Web browsers
- These are used to click through hyperlinked resources of the
World Wide Web and the rest of the internet including
intranets and extranets of corporate organizations. Packages
here include Netscape navigator, Microsoft explorer e.t.c
c) Electronic mail
 - This program is used in communication by sending and
receiving electronic messages (mail) through the internet or
intranet and extranets of corporate organizations
- Microsoft hot mail, Microsoft exchange e-mail, Netscape web
mail,
- Netscape massagers, Yahoo e.t.c.
d) Word processing and desktop publishing

Word processing

It computerizes the creation, editing, revision and printing of

documents by electronically processing the text data.

Package here include:-

- Microsoft word, Lotus word processor, Corel word perfect,

e.t.c.

The above packages do the following

 Provide a wide variety of attractively printed documents

 Converts all documents into HTML format for publication as
web pages provide a spelling checker to identify and correct
spelling errors
 Provide the saline's feature to find better choice of words, to
express ideas provide a grammar cheesier to identify and
correct grammar
  Provide an ideas processor/ outliner fixing to organize and
outline thoughts before preparing in document or developing a
presentation

Desktop publishing (DTP)

- Used to produce printed materials /hardcopy

- Its uses the process called Page Make up or page composition
to produce the printed materials

Its packages include:-

a) Adobe PageMaker

b) Quark press

e) Electronic spreadsheets

Its package include

- Lotus 1-2-3, Microsoft excel and Corel Quattro pro

- Are used in business analysis, planning and modeling

- Help in developing an electronic spreadsheet of rows and columns

f) Database management programs

- Its packages include

Microsoft access, lotus approach and Corel paradox

 - The packages help to set up and manage databases on personal
computers, network servers, or the world wide web

Database managers perform four primary tasks i.e.

 Database development - define and organize the content,

relationships and structure of data needed to built a database
 Database interrogation - access the data in a database to
display information in various formats e.g. forms, reports, web
pages e.t.c
 Database maintenance - add, delete, update and correct the
data in database
 Application development - develop prototypes of web pages,
queries, forms, reports, labels for proposed business
application.

g) Presentation graphics on multimedia

- Presentation graphics help to convert numeric data into

graphics display such as line charts, bar graphs, pie charts e.t.c
- They also help prepare multimedia presentations of graphic,
photos , animation and video clips
- Publishing to the world wide web
 - They also use multiple-colour and multiple media to
emphasize key points, strategic differences and important
trends in the data
- it’s being used in advertising - management reporting and
other business presentations

Packages include

- Microsoft PowerPoint, Lotus freelance, Corel presentations e.t.c.

- Multimedia software technology include hypertext and

hypermedia a hypertext contain only text and a limited amount of
graphics

- Hypermedia are electronic documents that contain multiple forms

of media e.g. text, graphics, video etc

h) Personal information managers

- Popular for productivity and collaboration and as a personal digital

assistant for handheld devices

Packages include

- Lotus organizer

- Microsoft outlook
- The packages help end-users to store, organize and retrieve
information about customers/clients, Scheduled and management
appointments, tasks and meeting e.t.c.

i) Groupware

- This is a multi - feature/function collaboration software i.e. it helps

workgroups and teams work together to accomplish groupware or
group work.

- Its packages include

- Lotus notes, - novel Group Wise,

- Netscape communication

- Microsoft exchange
Enterprise resource
Planning Software

Customer relationship
management
software Business Supply Chain
decision management
Support software
Human resource
management
software
Accounting and
Financial management
Application specific software
software
These are software designed for a specific line of work, duty,
function or even a specific profession. Examples are finance and
accounting packages such as SAGE, SUN SYSTEM, QUICKBOOKS,
e.t.c.

Systems software; computer system management

Systems software consists of programs that manage and support a

computer and its information processing activities.

This software interface between a computer and hardware and the

application programs of end-users as shown below:

End-Users

Systems software is sub-divided into:-

Application Software
a) Operating software/ system management programs
Systems software

Computer

Hardware
b) Systems development programs

Operating systems software

- An integrated system of programs that manages the operations

of CPU, controls the input/output, storage resources and
activities of the computer system.
- It also provides various support services as the computer
executes the application programs of users.

Major functions of operating system

- Providing user interface - end user/ system and network

communication
- Resource management - managing the use of hardware
resources
- File management - managing data and program files
- Task management - managing the accomplishment of tasks
- Utilities and other functions - providing a variety of support
services

Examples of operating systems

MS Windows XP, Windows 7/10/12

ELECTRONIC COMMERCE FUNDAMENTALS

- E-Commerce is the entire online process developing,
marketing, selling, delivering, servicing, and paying for
products and services transacted on the worked, global market
places of customers with a support of a worldwide network of
business partners
- To support this process electronic commerce rely on the
resources of the internet, extranets and other technologies
- To support electronic buying and selling goods and services E-
Commerce involves
- accomplishing a range of business processes e.g
- Marketing /Discovery
- Transaction processing
- Customer servicing and support
- under this category we have
a) product discovery
b) Product evaluation
c) Market of product research
d) Market stimulation / education
e) Terms negotiation
f) Order tracking
g) Order placement
h) Order payment
i) Order receipt
 j) Order selection and priority
k) Order billing / payment management
1) Order scheduling / fulfillment delivery
m) Product receipt
n) Product servicing and support
0) Customer service and support

Categories of E-Commerce applications

I) Business to consumer (B2C) E-Commerce

II) Business to Business (B2B)

III) Consumer to consumer (C2C)

IV) Business to Government (B2G)

V) E-Government (EG)

B2C E-Commerce applications

Here business develops attractive electronic market places to

enter and sell products & services to consumers.

B2B E-Commerce

Involves both electronic market places and direct links

between business through
- E-Commerce catalog websites
 - B2B E-Commerce portals for auction and exchange market
places for business
- Electronic data interchange

C2C E-Commerce

This involves consumers (as well as business) buying and selling

with each other through online auctions’ websites such as Electronic
personal advertising of products and services to sell or buy by
consumers at electronic newspaper, sites, consumer, E-commerce
portal or personal websites

ELECTRONIC COMMERCE TECHNOLOGIES

The network infrastructure for E-Commerce, include internets,

intranets and extranets Information technologies

Essential E-Commerce processes

- These are the key components of E-Commerce processes

architecture. They include:

1) Access and control security

E-Commerce processes must establish mutual trust and secure

access between the parties in an E-Commerce by authorizing access
and enforcing security features. His is done by use of personal
passwords.

2) Profiling and personalizing

Profiling is developing user profiles using respective personal data.

The profiles are used to recognize individual users and providing
personalized view of the contents of the site, product
recommendations and personalized web advertising.

3) Search Management

- Here efficient and effective search provide E-Commerce

website capabilities that help customers to find the specific
product or service they want to evaluate or buy
- Made possible by inclusion of E-Commerce search engines in
the software packages of E-Commerce.

4) Content management

Here content management software helps E-Commerce companies

to develop, generate, deliver update and archive text data and
multimedia information E-Commerce website.

5) Catalogue management

This involves use of multimedia catalogue of product information

to E-Commerce content
 - this involves use of multimedia catalogues of product
information to e-commerce content
It is a subset of content management
Both content and catalog management work with the profiling
tools to personalize the content of web pages seen by users
Major activities include
- pricing
- product configuration
- catalogue generation

6) Payment

- shopping cart/escort through the product types

- payment method support -web, electronic funds transfer
- payment verification

7) Workflow management

-Ensure that the proper transactions, decisions and work activities

are performed and the correct data and documents are relayed to
the right employees, customers, suppliers and other business
stakeholders.
It ensures that the pre-defined roles and rules are followed

 Buying process automation

 Document management
 Rule and role based content routing

8) Event notification

The event notification software works with the work flow

management to monitor all E-Commerce processes and record all
relevant events including unexpected changes and problem
situations.

It then works with the user profiling software to automatically

notify all involved stakeholders of important transaction events e.g.
notifying company's management so that they can monitor their
employee's responsiveness to E-Commerce events and customer -
supplier feedback.

- The messaging is done via:-

 E-Mail
 Message boards
 Newsgroups
 Pager
 Fax communication
  Cell phone

9) Collaboration and trading

This involves;

- Mediation between customers, suppliers and other

stakeholders to accomplish E-commerce transactions
- Negotiation
- Bidding I Auctioning Collaborative buying
- Online community

LOGICAL COMPONENTS OF A BUSINESS PROCESS

Figure 1.4 depicts the three logical components of a business process;

The information process is that portion of the overall Information

System (IS).

The operations process is a man-made system consisting of the people,

equipment, organization, policies and procedures whose objective is to
accomplish the work of the organization.

Operation processes typically include production, personnel, marketing

and sales, accounting, finance, warehousing and distribution.

The management process is a man-made system consisting of the

people, authority, organization, policies and procedures whose
objective is to accomplish the operations of the organization. The three
most prominent management activities are planning, controlling, and
decision making.
If you follow the flows connecting the three processes, you can
understand how these processes work together to accomplish the
organization’s objectives. To focus the discussion, let us use a customer
order/sales event as illustrated in figure 1.4. We will discuss each of
the numbered flows in the figure.

 Flow 1. Management hires personnel and establishes the means

for accomplishing the work of the organization, and designs the
procedures for warehousing and delivery of goods to customers.
 Flow 2. Management establishes broad marketing objectives and
assigns specific sales quotas by which progress toward the long-
run objectives can be measured. In addition, Mgt designs
procedures to facilitate operations.
 Flow 3. Normal operations begin with the IS receiving a
customer’s order to purchase goods.
 Flow 4. The IS acknowledges the customer’s order.
 FLOW: 5 The IS sends a request to the warehouse to ship goods
to the customer
This request identifies the goods and their location in the
warehouse
 FLOW 6 A document (packing slip) identifying the customer and
the goods is attached to the goods
 FLOW 7. The goods are shipped to the customer
 FLOW 8. The shipping department reports to the IS that the
goods have been shipped
 FLOW 9 The IS prepares an invoice and sends it to the customer
 FLOW 10 The IS sends management a report comparing actuals
sales to previously established sales quotas
 These 10 flows highlight several important concepts
 The information process facilities operations by maintaining
inventory and customer data and by providing electronic signals
(such as those in automated warehouses) and paper documents
with which to execute business events, such as shipments to
customers
 Operations - related processes and accounting - related processes
are integrated. For example, the shipping notice triggers the
accounting process of updating the sales and accounts receivable
data in conjunction with preparing the invoice, which is an
operational activity.
 Management designs the operations and information processes
and establishes these processes by providing people, equipment,
other physical components, and policies.
 Information process users include operations personnel,
management and people outside the organization , such as the
customer
A Logical Model of a Business Process
DATA VS INFORMATION

Data are facts or figures in a raw form. Data represent the

measurements and observations of objects and events. Information is
data presented in a form that is useful in a decision making activity. The
information has value to a decision maker because it reduces
uncertainty and increases knowledge about a particular concern.

TRANSFORMING DATA INTO INFORMATION

QUALITIES OF INFORMATION

To provide output useful for assisting managers and other users of

information, an IS must collect data and convert them into information
that possesses important qualities . In this section, we examine some of
the elements of information quality that allow you to design and
control the collection and processing of data. Qualities of information,
which, if attained, will help an organization achieve its business
objectives. The effectiveness of information must be evaluated in
relation to the purpose to be served –decision making .Effective
information is information that is useful for the decision to be made.
Effectiveness, then, is a function of the decisions to be made, the
method of decision making to be used, the information already
possessed by the decision maker, and the decision maker’s capacity to
process information. The superior factors such as ‘’users of
information’’ and ‘’overall quality (decision usefulness) provide
additional emphasis for these points.

Understandability enables users to perceive the information‘s

significance. Valued from the user’s point of view, understandable
information is presented in a form that Permits its application by the
user in the decision –making situation at hand. For example,
information must be in a language understood by the decision maker.
By language, we mean native language, such as English or French, as
well as technical language, such as those used in physics or computer
science. Also information that makes excessive uses of codes and
acronyms may not be understandable to some decision makers.

Information has relevance when it is capable of making a difference in a

decision making situation by reducing uncertainty or increasing
knowledge for that particular decision. For example a credit manager
making a decision about whether to grant credit to a customer might
use the customer’s financial statements and credit history because that
information could be relevant to the credit-granting .The customer’s
organization chart would not be relevant.

Information that is available to a decision maker before it loses its

capacity to influence a decision has timeliness. Lack of timeliness can
make information irrelevant. For example, the credit manager must
receive the customer’s credit history before making the credit –granting
decision. If the decision must be made without the information, the
credit history becomes irrelevant. Thus availability can increase
timeliness.

Predictive value and feedback value improve a decision maker’s

capacity to predict, confirm or correct earlier expectations. Information
can have both types of value because knowledge of the outcomes of
actions already taken will generally improve a decision maker’s abilities
to predict the results of similar future actions. A buyer for a retail store
might use sales forecasts- a prediction - to establish inventory levels.

If there is a high degree of consensus about the information among

independent measurers using the same measurement methods, the
information has verifiability. In accounting, we initially record assets at
their historical cost because evidence of the assets’ cost will permit
independent people to arrive at a similar estimate of the book value of
the asset.

Neutrality or freedom from bias means that the information is

objective. Bias is the tendency of information to fall more often on one
side than on the other of the object or event that it represents. For
example, an accounts receivable balance that is usually higher than
what can be collected is biased. Notice that verifiability addresses the
reliability of the measurement method e.g historical cost, market value
and neutrality addresses the reliability of the person doing the
measuring.

Comparability is the information quality that enables users to identify

similarities and differences in two pieces of information. If you can
compare information about two similar objects, or events, the
information is comparable. For example, in either your financial or
managerial accounting course, you probably studied ratio analysis of
financial statements.

You also learned that one of the ‘’yard sticks’’ against which you might
evaluate the ratios of company A would be similar ratios for competitor
company B or for the industry as a whole. But how good is your
comparison of two companies if one uses FIFO (first in first out)
inventory costing and the other uses LIFO (last in, first out) costing.
Generally accepted accounting principles strive to make accounting
information as comparable as possible across firms by establishing
common practices for accounting for inventory , fixed assets, leases
and so on.

If, on the other hand, you can compare information about the same
object or event collected at two points, in time, the information is
consistent. Again, in doing ratio analysis, you probably performed
horizontal or trend analysis for two or more years for one company.

Accuracy is the correspondence or agreement between the information

and the actual events or objects that the information represents. You
would have in-accurate information if the quantity on hand in an
inventory report was reported as 51 units, when the actual physical
quantity on hand was 15 units ( note the transportation)

Completeness is the degree to which information includes data about

every relevant object or event necessary to make a decision. We use
relevant in the sense of all objects or events necessary to make a
decision. We use relevant in the sense of all objects or events that we
intended to include. For example ,you will learn that an accountant
must ensure that an accounting system captures and records all valid
accounting event data, otherwise the accounting database is not
complete . For instance , suppose the shipping department prepared 50
shipping notices for 50 actual shipments made for the day. Two of the
notices were accidentally blown to the floor and were discarded with
the trash. As a result, the billing department prepared customer
invoices for only 48 shipments, not 50
Assignment 2

Discuss the factors that have contributed to the success of E-

Commerce: