CPA Business Notes

Becker – 2008 Edition Chapter 4 Page 1 of 15

Chapter 4 – Information Technology

Introduction to Information Technology:Components:1.

Hardware: actual physical computer or computer peripheral device.2.

Software: programs that process data and turn that data into information. General (i.e. MS Word) orspecific (internal audit program).3.

Data: raw facts. Production data (real, live data) or test data (staging/false data) are kept separately.4.

Network: communication media that shares data and information simultaneously.5.

People: various job titles and job descriptions (internal and/or outsourced).* Information organized and processed data. Data

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InformationStakeholder: anyone in the organization who has a role in creating or using the documents and datastored on the computers or networks.Business Information System – a software that accurately records and summarizes transactions for thebusiness; basic component of a business. 3 roles in business operations:1.

Process detailed data: transaction processing systems process and record the transactionsnecessary to conduct the business.2.

Assist in making daily decisions: management information systems, decision support systems,and knowledge systems meet the varied information needs of the different organizational levelsof the business.3.

Assist in developing business strategies: executive information systems collect and summarizedata on which strategic decisions will be made.Lower-level: more detailed Higher-level: less detailedHuman errors: random Computer errors: systematicSeries of events: hardware technicians – network administrators – software developers – end userAccounting Information Systems: Type of management information system, partly transactionprocessing system, partly knowledge system.Components of BISTransactionProcessing System(TPS)Decision SupportSystem(DSS)ManagementInformation System(MIS)Knowledge System(KS)ExecutiveInformation System(EIS)OverlapAccounting InformationSystems(AIS)

Becker – 2008 Edition Chapter 4 Page 2 of 15Example of accounting audit trail:INPUT OUTPUTSource document

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Journal

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Ledger

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Trial Balance

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Financial Statements Reports(invoice, timecard)

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STORE FILEFile original paper source documentObjective of AIS: record valid transactions, properly classify, input proper values, record in properaccounting period, and present the transactions in the financial statements.Well-designed AID contains an audit trail that allows a source document or a source transaction to betraced from input all the way to the final output and backwards!!!-

Test for completeness, existence, vouch...Components of BIS:TPS – systems that process and record routine daily transactions necessary to conduct the business.DSS – assist managers in making daily business decisions. Do not automate decisions, but provideinteractive tools with subjective judgments. Data driven and model driven systems “Expert systems”.MIS – Management reporting systems (MRS). Provide managerial and other end users with reportsES – Only used by top managers for monitoring business conditions. Assist in strategic, not daily decisionTypes of reports:1.

Periodic scheduled reports – available on regular basis to end users (weekly, monthly).2.

Exception reports – “red flag reports”. Produced when specific condition occurs.3.

Demand reports – “pull reports”. Some information from MIS is available on demand.4.

Ad Hoc reports – “on the fly”. Does not currently exist, but can be created on demand withouthaving to get a software. Called a user report writer.a.

Query – specific question made up of various criteria5.

Push Reports – similar to pull reports, it is a specific or general reports downloaded and possiblyaggregated from the internet. Example: if every time an end user logged on to a computer, areport window displayed the latest report that the end user needed.

People – Roles and Responsibilities Within the IT Function

Segregation of duties – most important characteristics.System Analyst: Architect of the overall computer hardware specifications.-

Internally-developed system:

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With end users, determine the requirements for a system

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Design the specifics to satisfy those requirements

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Design the overall application system

Becker – 2008 Edition Chapter 4 Page 3 of 15-

Purchased system:

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System analysts are system integrators

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Learn the purchased application

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Integrate it with existing applications by designing interfaces

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Determine how to convert the initial data from other applications

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Provide training to end usersComputer Programmer: include application programmers and system programmers-

Application programmer/software developer

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Responsible for writing/maintaining application programs.

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Handles the testing of application

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Train computer operator

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Programming budget will normally be devoted to program maintenance-

System programmer

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Install, support, monitor, and maintain operating system.

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Forecast hardware capacity and perform other capacity planning functions.

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Time can be spent testing and applying operating system upgrades-

For internal control, system programmers and application programmers should not be givenwrite/update access to data in production systems.Computer Operator:-

Outdated, because automated now.-

Scheduling processing jobs, running or monitoring scheduled production jobs, hanging tapes.-

End users are NOT computer operators.Control Clerk:-

Outdated, because automated now.-

Logged/input and maintained error and correction logsIT Supervisor:-

Manage the functions and responsibilities of the IT department.File Librarian:-

Store and protect programs and tapes from damage and unauthorized use.-

Most work is now automated.Security Administrator:-

Responsible for assignment of initial passwords and often the maintenance of those passwords.System Administrator:-

Database Administrator (DBA)

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Responsible for the actual software – maintaining and supporting the databasesoftware.