I S 630 : Account i ng I nf ormat i on Syst ems

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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 organizations 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.

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IS 630 : 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
organizations system of internal controls.
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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
organizations financial condition.
IS 630 : 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
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Business Environment
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Industry
The Company
Competitors
Technologies
Customers
Economic
Forces
People
Capital
Technology
Value Chain
Products
Structure
Objectives
Strategies
Measurements
Value Chain & Five Forces Model
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Porter s Value Chain
FIRM INFRASTRUCTURE

INBOUND
LOGISTICS

OPERATIONS

OUTBOUND
LOGISTIC

MARKETING
& SALES
LOGISTIC

SERVICE

HUMAN RESOURCE MANAGEMENT

TECHNOLOGY DEVELOPMENT

PROCUREMENT

VALUE

COST

MARGIN





























IS 630 : Lecture 1 10
KNOWLEDGE

Database
PROCESS

Information Processing
Business Rules, Procedures
INTERFACE

Input, Output
Location, Security

BUSINESS
CONTEXT
Hardware Software Networking
TECHNOLOGY DRIVERS
ERP, Object, Mobile,
Collaborative, etc.
BUSINESS DRIVERS
BPR, CRM,
SCM, e-Biz, etc.
KNOWLEDGE

Database
PROCESS

Information Processing
Business Rules, Procedures
INTERFACE

Input, Output
Location, Security

Business
Data
Business
Users
Hardware Software Networking
BUSINESS
CONTEXT
Elements in the Study of IS / AIS
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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.
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Systems and Subsystems
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INPUT OUTPUT
Systems and Subsystems . . .
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Systems and Subsystems . . .
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System Decomposition Diagram
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.)
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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).

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Information Technology Vs. Information System
Combinations of
hardware, software,
and telecom
networks use to
process data
Combinations of
hardware, software,
and telecom
networks that people
build and use to
collect, create, and
distribute useful data
in organizations (for
decision making)
Functional Model of an Information System
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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.
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Business Process in Enterprise Systems
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A business process is a set of related steps or
procedures designed to produce a specific
outcome.
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.


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Business Process Activities (Events)
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Decision /
management
events
Operating
events
Information
events
Define &Trigger
Trigger Trigger
Transforming Data into Information
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Basic System Model
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Example: Architecture of A Payroll System
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Information Qualities
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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.



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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.
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Decision Making Process
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IS 630 : Lecture 1 32
Information Systems in Organization
STRATEGIC

OPERATIONAL

EXECUTIVE INFORMATION SYSTEMS

MANAGEMENT INFORMATION SYSTEMS

TRANSACTION PROCESSING SYSTEMS

A
C
C
T

F
I
N
A
N
C
E

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

O
T
H
E
R
S

TACTICAL

VALUE CHAIN







Business Process
Reengineering/Redesign
IS 630 : Lecture 1 33
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)

IS 630 : Lecture 1 34
Decision-Making in an Organization
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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)
Management Problem Structure
and Information Requirements
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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



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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.
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Organizational Information Systems
Operational Level
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Operational Level
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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

Architecture
IS 630 : Lecture 1 42
Data Processing
Online processing
Batch processing
Data Input
Manual data entry
Semi-automated data entry (bar-code + manual)
Fully automated data entry (bar-code)

Transaction Processing Systems . . .
IS 630 : Lecture 1 43
Managerial Level
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Managerial Level
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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
Architecture
IS 630 : Lecture 1 46
Executive Level
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Executive Level
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The president, CEO, vice presidents, board
of directors
Decisions
Long-term strategic issues
Complex and non-routine problems
Unstructured decisions
Long-term ramifications
Architecture
IS 630 : Lecture 1 49
Information Systems
Supporting the Functional Areas
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Information Systems
that Span Organizational Boundaries
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Information System Stakeholders
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Information System Stakeholders
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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.
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