Accounting Information System Final Exam

Chapter 1 Accounting Information Systems and the Accountant

Accounting information systems (AISs) are at the intersection of two disciplines: accounting and
information systems. As a result, the study of AISs is sometimes referred to as the study of computerized
accounting systems. However, because we can't define an AIS by its size, it's better to define it by what it
does. Computerized information systems acquire, process, store, convert, and disseminate financial and
non-financial data for planning, decision-making, and control. Organizations use hardware, software,
and related system components to develop computerized information systems. Many financial
institutions' accountants are now compelled by law to file reports detailing probable cases of fraud,
money laundering, or money transfers to terrorist organizations. As advancements in IT enable for the
establishment of new reporting systems, financial accounting information is becoming increasingly
relevant and vital. In the fields of balanced scorecards, business intelligence, dashboards, and other key
performance indicators, IT has an impact on management accounting.

Chapter 2 Information Technology and AISs

It's tempting to dismiss "information technology" as being more important to computer

scientists than to accountants, but this is a mistake. It should be clear by the end of this chapter that "IT"
and "accounting systems" are closely intertwined. An AIS is a collection of hardware, software, data,
people, and procedures that work together to perform processing tasks. Computerized AISs must input,
process, store, and output data, and they usually rely on data communications to do so. The majority of
AIS data processing starts with an electronic or manual source document. AISs can capture data that is
already in machine-readable formats via POS devices, MICR readers, OCR readers, and magnetic strip
readers. The central processor unit handles the computer system's data manipulation functions (CPU).
Primary memory and microprocessors are found in all CPUs. The majority of AISs are I/O bound rather
than process bound. AISs can save and archive data on permanent media using secondary storage
devices. Many AISs now use LANs or WANs to send and receive e-mail, share computer resources, save
money on software, gather data, and distribute outputs. Access to computer software packages, backup
and recovery file services, and website building and hosting are examples of applications. An AIS's
software handles the specific data processing operations that are necessary. Operating systems allow
computers to run independently as well as execute applications. Programming languages allow IT
experts to translate processing logic into instructions that computers can execute.

Chapter 3 Data Modeling

 Massive databases store all of the data used by practically every department in many large
corporations. Database management systems are specialized software packages that alter data in
databases. Most accounting systems are comprised of a complex mix of data stored in databases,
processing software, and hardware that interact to support specific storage and retrieval functions. A
database is not necessarily a collection of data. Most business databases are massive, complicated
collections of private data that developers painstakingly construct and safeguard, and which are at the
heart of accounting information systems. Almost every AIS store accounting data in databases.
Accounting specialists are concerned about large, multi-user accounting databases for a variety of
reasons. The REA model is a set of database design recommendations. You may model databases by
focusing on resources, events, and actors. The REA model graphically displays the entities required for a
database and the sorts of relationships that exist between them using E-R diagrams. Databases must be
created with care. The goal is to create a database in third normal form or better.

Chapter 4 Organizing and Manipulating the Data in Databases

Microsoft Access is widely used by organizations and individuals for simple database
applications. In many other database systems, the methods for creating tables and inserting records are
similar to those used in Access. Database management systems allow users to create their own
databases and change file data using data manipulation languages (DMLs) (DMLs). Microsoft Access is a
popular database management system that small businesses can use to create entire accounting
systems. Data extraction from a database is a common activity, and Access has a number of tools to help
you achieve it. At some point, accountants will need to extract data from a database or data warehouse
using data manipulation languages such as SQL, OLAP, or data mining tools. The design and delivery of
database management systems are being influenced by cloud computing and data mining.

Chapter 5 Database Forms and Reports

Two other important database tools are forms and reports. How to create forms and how to use
them for input and output purposes. Although the abilities detailed here are applicable to other
database technologies such as FoxPro or Oracle, both sections employ Microsoft Access to demonstrate
these actions. Forms are used in databases to enter and view data from records in tables. When you use
forms to create new records, the data fields in the customized forms inherit the same values, attributes,
and input constraints that were set up for the table's design. Tables or queries that reference tables are
used to create reports in Access. (1) report heading, (2) page headings, (3) group headings, (4) detail or
body, (5) group footer, (6) page footer, and (7) report footer are the seven major components of a
typical report. Forms and reports should be named in a methodical manner. A form's standard prefix is
FRM, and a report's standard prefix is RPT. Calculated fields like invoice line extensions are rarely stored
in databases (prices times quantities). Instead, we use queries to calculate these fields. Many reports
contain grouped data, such as a set of lines for a certain invoice or a series of invoices for a single
customer. It is also possible to require a report to provide control totals, averages, maximum, or
minimum values for each group.

Chapter 6 Documenting Accounting Information Systems

 The logical flow of data within a computer system, as well as the procedures that staff must
follow in order to do application tasks, are referred to as documentational. Nine reasons to document
an AIS are (1) to explain how the system works, (2) to train others, (3) to assist developers in designing
new systems, (4) to control system development and maintenance costs, (5) to standardize
communications among system designers, (6) to provide information to auditors, (7) to document a
business's processes, (8) to assist a company in complying with the Sarbanes-Oxley Act of 2002 and AS5,
and (9) to establish employee accountability for specific tasks or procedures. A document flow chart, for
example, depicts the physical movement of documents within an AIS by outlining where documents are
generated, transmitted, assessed, and stored, as well as the activities they cause. A system flow chart
displays the electronic movement of data through an AIS, specifies which processing procedures and
files are used when, and provides a broad perspective. Process maps also show how information flows
through an organization, require only a few symbols, and are among the simplest to create and
understand.

Chapter 7 Accounting Information Systems and Business Processes: Part I

Accounting professionals, for example, can make a transaction from a source document, or a
client might purchase things online. Regardless of how the process begins, we publish yearly financial
reports and shut temporary accounts in preparation for the next cycle. The sales process and the
purchase process are two business procedures that are used by numerous companies. The sales process
starts with a client order and finishes with cash collection. Sales orders, sales invoices, remittance
advices, shipping notices, and customer checks are all important source documents involved with the
sales process.

Chapter 8 Accounting Information Systems and Business Processes: Part II

This is because the inputs, processing, and outputs for human resources and fixed assets are
highly different. In the resource management process, two areas of importance are human resource
management and fixed asset management. Employee activities and payroll events are both included in
human resource management. The events linked to transforming raw materials into final goods
inventory are included in the manufacturing process. A firm that practices lean manufacturing must
define value from the perspective of its customers, structure production and data collecting into value
streams, empower people to make choices, and then strive for excellence in all parts of the business.
Because it is concerned with the acquisition and utilization of monies required for operations, the
finance process overlaps all other processes. Cash management is a crucial aspect of the financing
process since it needs businesses to regularly check cash levels, invest any excess, and replace
temporary gaps with bank loans. There are several other business procedures that are particular to
certain sectors. Custom AIS requirements are specific to each industry or vertical market segment with
customized procedures. BPR is the technique of evaluating business processes and revamping them
from the ground up.

Chapter 9 Introduction to Internal Control Systems

 Internal control refers to the policies, plans, and procedures implemented by a company's
management to protect its assets, ensure the integrity and completeness of its financial data, and meet
its objectives. The four objectives of an organization's internal control system are to secure assets,
ensure the correctness and reliability of accounting data, enhance operational efficiency, and encourage
adherence to specified management standards. Management should perform a cost benefit analysis on
each potential control procedure or consider a risk matrix if qualitative considerations cannot be ignored
in order to develop an optimal internal control package.

Chapter 10 Computer Controls for Organizations and Accounting Information Systems

Controls that affect the entire company and influence the efficacy of other controls are known
as enterprise controls. Controls at the enterprise level are very significant because they typically have a
broad influence on other controls, such as IT general controls and application-level controls. Controls at
the enterprise level are critical because they frequently have a broad influence on other controls, such
as IT general controls and application-level controls. Management's ethical ideals, philosophy,
assignment of power and responsibility, and the efficacy of the board of directors are all examples of key
controls at the organizational level. Because it raises the expenses and resources required by an
intruder, an integrated security system backed by a comprehensive security strategy may greatly
minimize the danger of attack. Controls that apply to all IT service activities are known as IT general
controls. For application control reliability, these controls are necessary. Organizations are increasingly
reliant on wireless networks, and they must understand the requirement for a virtual private network
(VPN) to ensure that users have secure access to business data and other internet resources.
Organizations must develop controls for computers to protect those assets as well as the data that
resides on them due to increased mobility of employees.

Chapter 11 Computer Crime, Fraud, Ethics, and Privacy

The high degree of public interest in computer crime, misuse, and fraud is evidenced by articles
in Fortune, Business Week, the Wall Street Journal, Computerworld, Security Focus, and WIRED. The
Cyber Security Institute, for example, runs an annual assessment to assess the breadth of computer
crime in the United States. Computer security professionals from enterprises, government
organizations, financial institutions, medical institutions, and colleges in the United States responded to
this poll. Protecting sensitive information, being socially responsible, respecting rights of privacy,
avoiding conflicts of interest, and identifying prohibited uses of computer hardware and software are all
examples of ethical conduct that managers may apply. To protect themselves from computer crimes,
businesses should (1) seek top management support, (2) educate users about computer crime and
abuse, (3) conduct a security inventory and protect passwords, (4) design and implement control
procedures, and (5) recognize the signs and symptoms of computer crime and abuse.

Chapter 12 Information Technology Auditing

Auditors now have several unique tools for establishing and assessing internal controls in IT
systems, such as general-purpose software and GAS. When creating audit programs, IT auditors utilize a
risk assessment technique to guarantee that the costs of control measures do not outweigh their value.
Testing and verifying computer programs, as well as examining system software and validating user
accounts and access credentials, are all part of computer auditing. The increased focus on fraud and
internal controls imposed by SAS No. 99 and the Sarbanes-Oxley Act of 2002 has raised the need for IT
auditors' services.

Chapter 13 Developing and Implementing Effective Accounting Information Systems

Many large organizations have IT professionals to perform this work. Identification of general
systems goals, top management systems goals, and operating management systems goals is required for
systems analysis. A systems development life cycle is divided into four stages: (1) planning and
investigation, (2) analysis, (3) design, and (4) implementation, follow-up, and maintenance. The study
team's recommendations are included in the systems analysis report. Outputs come first in detailed
systems design, followed by inputs and processes. An organization's IT operations, financial processes,
or research-related work may be outsourced. PERT, Gantt charts, and project management software are
used by organizations to manage the installation of complex information systems. Organizations must
follow up to see if new systems are performing as expected.

Chapter 14 Accounting on the Internet

The Internet essentials are covered in this portion of the chapter, which includes Internet
addresses and software, intranets and extranets, the World Wide Web, IDEA, groupware, electronic
conferencing, and Weblogs. Accountants may utilize the Internet for communication, research, and
trade since it is made up of local, wide-area, and global networks. Most accountants utilize the
multimedia component of the World Wide Web for similar purposes. Extranets are similar to intranets;
except they allow other people to access files and databases on the internal network. Businesses can
use XBRL, a standardized variant of XML that offers a consistent format for financial data and facilitates
searches and extraction for comparative purposes, to transmit financial information over the Internet.
Some firms choose to employ pricey, but private, value-added networks (VANs) rather than the Internet
to enable e-commerce applications for security concerns. Hacking, identity theft, spam, and phishing are
all worries that affect AISs. To address these concerns, many firms utilize firewalls, intrusion detection
systems, proxy servers, data encryption methods, digital signatures, and digital timestamping. The
necessity to protect users' personal information, as well as the growing threat of identity theft, are both
privacy concerns.

Chapter 15 Accounting and Enterprise Software

 All forms of accounting transactions may be processed using integrated accounting software.
Sales and purchases are examples of transactions that influence accounts in both regular and special
journals. Integrated accounting software divides transaction processing into modules and connects
them. Accounts receivable, accounts payable, inventory, and payroll are all common modules found in
integrated accounting software. Entry-level, small-to-medium-sized firm, ERP, particular industry, and
custom-built software are all examples of integrated accounting software. General ledger, accounts
receivable or sales, accounts payable or purchasing, inventory, and payroll modules or transaction
groups may be included in integrated accounting software packages. Hosted solutions, where customers
lease software as a service and client data is stored on the vendor's hardware, are one of the
deployment choices for accounting software and high-end ERP systems. Financial and non-financial data
from a company's business operations are combined in ERP systems. Extended ERP solutions integrate a
company's supply chain by adding front-office features to traditional ERP systems. Improved and more
effective company operations bring in greater revenues and cost reductions, resulting in softening
savings. There are a variety of warning signs that a firm needs to improve its AIS, such as disgruntled
vendors, customers, or workers.