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Accounting Information Systems

Introduction to AIS. Accounting Information Systems. Study Objectives. An overview of business processes An overview of an accounting information system The business process linkage throughout the supply chain The IT enablement of business processes Basic computer and IT concepts

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Accounting Information Systems

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  1. Introduction to AIS Accounting Information Systems

  2. Study Objectives • An overview of business processes • An overview of an accounting information system • The business process linkage throughout the supply chain • The IT enablement of business processes • Basic computer and IT concepts • Examples of IT enablement • The internal control structure of organizations • The importance of accounting information systems to accountants • The relation of ethics to accounting information systems

  3. An Introduction To Business Processes • Accounting Information System must identify • Transactions to record, • Capture all details, • Properly process into correct accounts, and • Provide reports externally and internally. SO 1 An overview of business processes

  4. An Introduction To Business Processes • Business Process - a sequence of work steps performed in order to produce a desired result. • Examples: • Completing a sale • Purchasing raw materials • Paying employees • Paying vendors SO 1 An overview of business processes

  5. An Introduction To Business Processes Four general types of business processes: • 1. Revenue Processes(Chapter 8) • a. Sales • b. Sales return • c. Cash collection SO 1 An overview of business processes

  6. An Introduction To Business Processes Four general types of business processes: • 2. Expenditure Processes(Chapters 9 and 10) • a. Purchase • b. Purchase return • c. Cash disbursement • d. Payroll • e. Fixed asset SO 1 An overview of business processes

  7. An Introduction To Business Processes Four general types of business processes: • 3. Conversion Processes(Chapter 11) • a. Planning • b. Resource management • c. Logistics SO 1 An overview of business processes

  8. An Introduction To Business Processes Four general types of business processes: • 4. Administrative Processes(Chapter 12) • a. Capital • b. Investment • c. General ledger SO 1 An overview of business processes

  9. An Introduction To Business Processes • Internal controlsare the set of procedures and policies adopted to: • safeguard assets, • check accuracy and reliability of data, • promote operational efficiency, and • encourage adherence to prescribed managerial practices. SO 1 An overview of business processes

  10. An Introduction To Business Processes Quick Review When a customer returns goods that were purchased, the business process to accept the return would most likely be a(n) • administrative process • b. conversion process • 1. Revenue Processes • a. Sales • b. Sales return • c. Cash collection • c. expenditure process • d. revenue process SO 1 An overview of business processes

  11. The Accounting Information System Various Business Processes Exhibit 1-1 SO 2 An overview of an accounting information system

  12. The Accounting Information System Quick Review Which of the following is least likely to be an output of the accounting information system? • a check • b. a report • A bar code is usually an input to the accounting information system. • c. an invoice • d. a bar code SO 2 An overview of an accounting information system

  13. Business Processes Throughout The Supply Chain • Supply Chain - processes and information flows that involve the movement of materials, funds, and related information through the full logistics process, from the acquisition of raw materials to the delivery of finished products to the end user. • The supply chain includes all: • Vendors • Service providers • Customers • Intermediaries SO 3 The business process linkage throughout the supply chain

  14. Business Processes Throughout The Supply Chain Exhibit 1-2 A simplified Supply Chain for McDonald’s SO 3 The business process linkage throughout the supply chain

  15. Business Processes Throughout The Supply Chain Quick Review Which of the following is not true of the supply chain? • The supply chain includes vendors. • b. The supply chain excludes customers. • c. The supply chain includes information flows. • d. The supply chain includes secondary suppliers. SO 3 The business process linkage throughout the supply chain

  16. IT Enablement of Processes and the AIS Information Technology- Computers, ancillary equipment, software, services, and related resources as applied to support business processes. IT Enablement - Using IT systems to enhance efficiency and effectiveness of internal or supply chain processes. SO 4 The IT enablement of business processes

  17. IT Enablement of Processes and the AIS • IT usage accomplishes one or more of the following objectives: • Increased efficiency of business processes • Reduced cost of business processes • Increased accuracy of the data related to business processes Business Process Reengineering (BPR) is the purposeful and organized changing of business processes to make them more efficient. SO 4 The IT enablement of business processes

  18. IT Enablement of Processes and the AIS Quick Review Which of the following is not an objective of IT enablement? • increased accuracy of data • b. reduced cost • c. reduced security problems • d. increased efficiency SO 4 The IT enablement of business processes

  19. Basic Computer and IT Concepts Basic Computer Data Structures • Smallest unit • Values = zero or one • Data hierarchy: • Bit, or binary digit • Byte • Field • Record • File • Database • One character • Eight bits • One item within record • Example - last name • Set of related fields • Example – employee #, name, pay rate, etc. • Set of related records • Entire collection of files SO 5 Basic computer and IT concepts

  20. Basic Computer and IT Concepts Quick Review The correct order of the computer data hierarchy is • byte, bit, record, field, file, database • b. bit, byte, record, field, file, database • c. bit, byte, field, record, file, database • d. bit, byte, field, record, database, file SO 5 Basic computer and IT concepts

  21. Basic Computer and IT Concepts Relational Database Example - relationship in data of a customer having more than one order. Master File Example - payroll master file maintains the relatively permanent data to process payroll transactions. Example - transaction file is processed against the master file, and year-to-date balances are updated in the master file. Transaction File SO 5 Basic computer and IT concepts

  22. Basic Computer and IT Concepts File Access and Processing Modes • Sequential access • Random access • Indexed Sequential Access Method (ISAM) • Batch processing • Online processing • Real-time processing SO 5 Basic computer and IT concepts

  23. Basic Computer and IT Concepts Data Warehouse and Data Mining • Data warehouse • Operational database • Data mining SO 5 Basic computer and IT concepts

  24. Basic Computer and IT Concepts Quick Review The process of searching for identifiable patterns in data is called • sequential processing • b. data warehousing • c. data mining • d. real-time processing SO 5 Basic computer and IT concepts

  25. Basic Computer and IT Concepts Networks and the Internet • Network(two or more computers linked together) • Types important to accounting: • Local Area Network (LAN) • Internet • Extranet • Intranet SO 5 Basic computer and IT concepts

  26. Examples of IT Enablement E-Business • Encompasses all forms of: • Online electronic trading • Consumer-based e-commerce • Business-to-business electronic trading • Business-to-business process integration • Internal use of IT • Examples, buying: • a book at Amazon.com • clothes at Landsend.com SO 6 Examples of IT enablement

  27. Examples of IT Enablement Electronic Data Interchange The intercompany, computer-to-computer transfer of business documents in a standard business format. Example:Transmit purchase orders, invoices, and payments electronically between trading partners. SO 6 Examples of IT enablement

  28. Examples of IT Enablement Point of Sale System A system of hardware and software that captures retail sales transactions by standard bar coding. • Example:Customer • checks out through the cash register, • bar codes are scanned on the items purchased, • prices are determined by access to inventory and price list data, • sales revenue is recorded, and • inventory values are updated. SO 6 Examples of IT enablement

  29. Examples of IT Enablement Automated Matching A computer system in which the software matches an invoice to its related purchase order and receiving report. Example:Ford Motor Company described in text illustrated an automated matching system. SO 6 Examples of IT enablement

  30. Examples of IT Enablement Evaluated Receipt Settlement (ERS) An invoice-less system in which computer software completes an invoice-less match that is a comparison of the purchase order with the goods received. E-Payables and Electronic Invoice Presentment and Payment (EIPP) Web-enabled receipt and payment of vendor invoices. SO 6 Examples of IT enablement

  31. Examples of IT Enablement Enterprise Resource Planning Systems (ERP) Multi-module software system designed to manage all aspects of an enterprise. Usually broken down into modules such as • financials, • sales, • purchasing, • inventory management, • manufacturing, and • human resources. SO 6 Examples of IT enablement

  32. Examples of IT Enablement Quick Review An IT enabled system for purchasing that is an “invoice-less” system is called a(n) • automated matching system • b. evaluated receipt settlement • c. e-payables • d. point of sale system SO 6 Examples of IT enablement

  33. The Control Environment of Organizations • Risks that impact financial standing: • Assets will be stolen or misused • Errors in accounting data or information • Fraudulent activity • Risks inherent in IT systems, such as • Erroneous input of data • Erroneous processing of data • Computer fraud • Computer security breaches • Hardware or software failure • Natural disasters SO 7 The internal control structure of organizations

  34. The Control Environment of Organizations Enterprise Risk Management (ERM) ERM is defined as . . . a process, effected by an entity’s board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives. SO 7 The internal control structure of organizations

  35. The Control Environment of Organizations Enterprise Risk Management (ERM) • Requires management set policies and procedures related to: • Internal Environment • Objective Setting • Event Identification • Risk Assessment • Risk Response • Control Activities • Information and Communication • Monitoring SO 7 The internal control structure of organizations

  36. The Control Environment of Organizations Enterprise Risk Management (ERM) • Management should ensure the following types of control structures exist: • Code of ethics (Chapter 3) • COSO accounting internal control structure (Chapter 3) • IT system control structure (Chapter 4) • Corporate governance structure (Chapter 5) • IT governance structure (Chapter 6) SO 7 The internal control structure of organizations

  37. The Control Environment of Organizations Quick Review The COSO report written for the purpose of assisting managers in the challenge of managing risk in their organizations is entitled • “Internal Controls—Integrated Framework” • b. “Enterprise Risk Management—Integrated Framework” • c. “Corporate Governance” • d. “IT Governance” SO 7 The internal control structure of organizations

  38. The Accountant’s Role in AIS • Accountants may be • users of the AIS, • part of the design or implementation team of an AIS, and/or • auditors of an AIS. SO 8 The importance of accounting information systems to accountants

  39. The Accountant’s Role in AIS Quick Review Accountants have some form of use of the AIS in all but which role? • user • b. programmer • c. auditor • d. designer SO 8 The importance of accounting information systems to accountants

  40. Ethics and the AIS • Examples of potential unethical behaviors: • Fraudulent financial reporting • Revenue inflation • Expense account fraud • Inflating hours worked for payroll purposes • Computer fraud • Hacking • Browsing confidential data SO 9 The relation of ethics to accounting information systems

  41. Ethics and the AIS Quick Review Which of the following is not true of unethical behavior? • The only category of unethical behavior for accountants is inflating revenue. • Accountants are often pressured to help commit or cover up unethical behavior. • Hacking is an unethical behavior that accountants should be concerned about. • An accounting information system can be used to cover up unethical behavior. SO 9 The relation of ethics to accounting information systems

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