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AIS-1 - Module On Topic 1

1. An accounting information system (AIS) collects, records, stores, and processes accounting and other data to produce information for decision makers. An AIS has six key components: people, procedures, data, technology infrastructure, software, and internal controls. 2. An AIS serves three important functions: collecting and storing organizational data, transforming data into useful information for management decision making, and providing controls to safeguard assets and data. 3. A well-designed AIS can add value to an organization by improving quality and reducing costs, increasing efficiency, facilitating knowledge sharing, strengthening supply chain management, enhancing internal controls, and aiding decision making. Timely AIS information

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57 views

AIS-1 - Module On Topic 1

1. An accounting information system (AIS) collects, records, stores, and processes accounting and other data to produce information for decision makers. An AIS has six key components: people, procedures, data, technology infrastructure, software, and internal controls. 2. An AIS serves three important functions: collecting and storing organizational data, transforming data into useful information for management decision making, and providing controls to safeguard assets and data. 3. A well-designed AIS can add value to an organization by improving quality and reducing costs, increasing efficiency, facilitating knowledge sharing, strengthening supply chain management, enhancing internal controls, and aiding decision making. Timely AIS information

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Topic 1: The Role of Information Technology (IT) in the Accountancy Profession.

A. Accounting Information System (AIS) definition and functions


It has often been said that accounting is the language of business. If that is the case, then an accounting information
system (AIS) is the intelligence—the information-providing vehicle—of that language. Accounting is a data
identification, collection, and storage process as well as an information development, measurement, and
communication process. By definition, accounting is an information system, since an AIS collects, records, stores,
and processes accounting and other data to produce information for decision makers. This is illustrated in Figure 1-3
below.

Data are facts that are collected, recorded, stored, and processed by an information system. Businesses need to collect several kinds of data, such as the activities that
take place, the resources affected by the activities, and the people who participate in the activity. For example, the business needs to collect data about a sale (date,
total amount), the resource sold (good or service, quantity sold, unit price), and the people who participated (customer, salesperson).

Information is data that have been organized and processed to provide meaning and improve the decision-making process. As a rule, users make better decisions as
the quantity and quality of information increase.

An AIS can be a paper-and-pencil manual system, a complex system using the latest in IT, or something in between.
Regardless of the approach taken, the process is the same. The AIS must collect, enter, process, store, and report
data and information. The paper and pencil or the computer hardware and software are merely the tools used to
produce the information.
This text does not distinguish an AIS from other information systems. Instead, our viewpoint is that the AIS can and
should be the organization’s primary information system and that it provides users with the information they need to
perform their jobs.
B. Components of AIS
There are six components of an AIS:
1. The people who use the system
2. The procedures and instructions used to collect, process, and store data
3. The data about the organization and its business activities
4. The information technology infrastructure or hard wares, including the computers, peripheral devices, and
network communications devices used in the AIS
5. The software used to process the data
6. The internal controls and security measures that safeguard AIS data

These six components enable an AIS to fulfill three important business functions:
1. Collect and store data about organizational activities, resources, and personnel. Organizations have a
number of business processes, such as making a sale or purchasing raw materials, which are repeated
frequently.
2. Transform data into information so management can plan, execute, control, and evaluate activities,
resources, and personnel – for decision making.
3. Provide adequate controls to safeguard the organization’s assets and data.
C. AIS value to an organization

A well-designed AIS can add value to an organization by:


1. Improving the quality and reducing the costs of products or services. For example, an AIS can monitor machinery
so operators are notified immediately when performance falls outside acceptable quality limits. This helps maintain
product quality, reduces waste, and lowers costs.
2. Improving efficiency. For example, timely information makes a just-in-time manufacturing approach possible, as
it requires constant, accurate, up-to-date information about raw materials inventories and their locations.
3. Sharing knowledge. Sharing knowledge and expertise can improve operations and provide a competitive
advantage. For example, CPA firms use their information systems to share best practices and to support
communication between offices. Employees can search the corporate database to identify experts to provide
assistance for a particular client; thus, a CPA firm’s international expertise can be made available to any local client.
4. Improving the efficiency and effectiveness of its supply chain. For example, allowing customers to directly access
inventory and sales order entry systems can reduce sales and marketing costs, thereby increasing customer retention
rates.
5. Improving the internal control structure. An AIS with the proper internal control structure can help protect
systems from fraud, errors, system failures, and disasters.
6. Improving decision making. Improved decision making is vitally important and is discussed below in more detail.
Decision making is a complex, multistep activity: identify the problem, collect and interpret information, evaluate
ways to solve the problem, select a solution methodology, and implement the solution. An AIS can provide
assistance in all phases of decision making. Reports can help to identify potential problems. Decision models and
analytical tools can be provided to users. Query languages can gather relevant data to help make the decision.
Various tools, such as graphical interfaces, can help the decision maker interpret decision model results, evaluate
them, and choose among alternative courses of action. In addition, the AIS can provide feedback on the results of
actions.
An AIS can help improve decision making in several ways:
 It can identify situations requiring management action. For example, a cost report with a large variance
might stimulate management to investigate and, if necessary, take corrective action.
 It can reduce uncertainty and thereby provide a basis for choosing among alternative actions.
 It can store information about the results of previous decisions, which provides valuable feedback that can
be used to improve future decisions. For example, if a company tries a particular marketing strategy and the
information gathered indicates that it did not succeed, the company can use that information to select a
different marketing strategy.
 It can provide accurate information in a timely manner. For example, Walmart has an enormous database
that contains detailed information about sales transactions at each of its stores. It uses this information to
optimize the amount of each product carried at each store. It can analyze sales data to discover items that
are purchased together, and can use such information to improve the layout of merchandise or to encourage
additional sales of related items. For example, Amazon uses its sales database to suggest additional books
for customers to purchase.

Assigned Activity: Essay writing

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