Fab, a trusted employee and a

systems engineer, had access to both

the computer access list and user
passwords. The firm’s competitor
recently hired him for twice his
salary. After leaving, Fab continued to
browse through his old employers
data, such as price lists, customer
lists, bids on jobs, and so on. He
passed this information to his new
employer.
 INFORMATION
SYSTEM

By: Sheila Mae Lupian-Poliran

INFORMATION
ENVIRONMENT
 Benefits of information may include:
• Reduction of uncertainty
• Improved decisions
• Improved ability to plan and schedule activities

Benefits of Information
̶ Cost of producing information
Value of information

Costs may include time and resources spent:

• Collecting data
• Processing data
• Storing data
• Distributing information to users
Characteristics of useful
information:
• Relevance
• Reliability
• Completeness
• Timeliness
• Understandability
• Verifiability
• Accessibility
 Data vs. Information
Data Information
are facts which may or Processed Data
may not be causes the user to take
processed and have action and make
no direct effect on decision.
the user.
 Internal External
Data Sources Sources
Sources
Data

Operational Stages in the Information System

Data Data Database

Collection Processing Management

Information
Feedback
Generation
 Stake Internal and
holders Top External
Management
Flows of
Middle Information
Management

Operations Management Suppliers

Customers

Operations Personnel
Day-to-Day Operations Information
 SYSTEM
A group of two or more interrelated
components or subsystems that
serve a common purpose.

Car operating system

 Elements of a system

1. Multiple components 2. Relatedness

 System versus Subsystem

Driveline Isolated

Brake system

Suspension Isolated
Interior
 System Decomposition

Decomposition is a process of dividing the

system into smaller subsystem parts.
 Subsystem
Interdependency
 Information System
The set of formal procedures by which
data are collected, processed into
information, and distributed to users.
5 Basic Resources of Information
System

Personnel
Hardware
Software
Networks
Data
 Types of Information System
based on different levels of hierarchy in an organization
 Information System (IS)

Management
Accounting Information
Information System
System (AIS)
(MIS)

General
Transaction Processing Ledger/Financial Management Reporting Financial Management
Systems (TPS) Reporting System System (MRS) System
(GL/FRS)

Expenditure Cycle Conversion Cycle Revenue Cycle Marketing Systems

Purchase System Cost Accounting System Sales Processing System Distribution Systems

Human Resource
Cash Disbursement Production Planning System
Cash Receipts System
System and Control system

Payroll Processing
System
A Framework for
Fixed Asset System
Information System
Broad classes of Information System

Accounting
Information
System

Management
Information
System
 Information System

A Framework for (IS)

Information System Accounting

Information System
(AIS)
Management
Information System
(MIS)

General
Management
Transaction Processing Ledger/Financial Financial Management
Reporting System
Systems (TPS) Reporting System System
(MRS)
(GL/FRS)

Expenditure Cycle Conversion Cycle Revenue Cycle Marketing Systems

Information
Cost Accounting Sales Processing
Purchase System Distribution Systems
System System

Human Resource
Cash Disbursement Production Planning System
Cash Receipts System
System and Control system

System (IS)
Payroll Processing
System

Fixed Asset System

Accounting Management
Information Information
System (AIS) System (MIS)
Information
System (IS)

Accounting
Information
System (AIS)

Transaction
Processing
Systems (TPS)

General
Ledger/Financial
Major Subsystems of AIS
Reporting System
(GL/FRS)

Management

1. Transaction Processing
Reporting System
(MRS)

System
2. General
Ledger/Financial
Reporting System
(GL/FRS)
3. Management Reporting
System (MRS)
 Major Subsystems of AIS
1. Transaction Processing System
 supports daily business operations with
numerous reports, documents and
messages for users throughout the
organization.
 central to the overall function of the
information system by converting economic
events into financial transactions; recording
financial transactions in the accounting
records (journals and ledgers); and
distributing essential financial information
to operations personnel.
 Transaction

An event that affects or is of

interest to the organization
and is processed by its
information system as a
unit of work.
Financial vs. Nonfinancial Transaction

Financial Transaction Nonfinancial Transaction

An economic event that Events that do not meet

affects the assets and
equities of the
organization, is reflected
in its accounts, and is
measured in monetary
terms.
the narrow definition
of a financial
transaction.
(residual definition)
 Transactions Processed by the
Information System

Financial
Transactions
Information Information User
System Decisions

Nonfinancial
Transactions
 Methods of Data Processing
Distinguishing Feature Batch Processing Real-time Processing
Information time Lag exists between Processing takes place
frame time when the when the economic
economic event occur event occurs.
s and when it is
recorded.
Resources Generally, fewer More resources are
resources (hardware, required than for batch
programming, training) processing.
are required.
Operational efficiency Certain records are All records pertaining
processed after the to the event are
event to avoid processed
operational delays. immediately.
 Major Subsystems of AIS
2. General Ledger/Financial Reporting
System (GL/FRS)

 Produces the traditional financial

statements, balance sheet,
statement of cash flows, tax
returns, and other reports
required by law.
 Major Subsystems of AIS
2. General Ledger/Financial Reporting System
(GL/FRS)

Transaction GL Control
cycles Accounts

General Ledger
System Financial
Reports

Financial
Reporting
System
Clientele
External Users
 Major Subsystems of AIS
3. Management Reporting System (MRS)
 Provides internal management with
special purpose financial reports such as
budgets, variance reports, responsibility
reports, and cost-volume-profit analysis.
 Tool for PLANNING and CONTROL
 Discretionary reporting because the
organization can choose what to report
and how to present it.
 General Model for Accounting Information System
The External Environment
The Information
Database
System Management

External Data Data Information External Users

Sources of Collection Processing Generation
Data

Feedback
Internal
Sources of Internal End
Data Users

The Business Organization

Feedback
 Management Information
System (MIS)

Processes
nonfinancial
transactions
that are not
normally
processed by
traditional AIS.
 Examples of MIS Applications in
Functional Areas
Function Examples of MIS Applications
Finance Portfolio Management System
Capital Budgeting System
Marketing Market Analysis
New Product Development
Product Analysis
Distribution Warehouse Organization and Scheduling
Delivery Scheduling
Vehicle Loading and Allocation Models
Personnel Human Resource Management System
 Job Skill Tracking System
 Employee Benefits System
 Objectives of Information
System
• To support the stewardship
function of management.
• To support management
decision making.
• To support the firm’s day-to-
day operations.
 Ways to acquire Information
System

• Develop the customized systems from

scratch through in-house systems
development activities

• Purchase preprogrammed commercial

systems from software vendors
System Development Life Cycle

The formal process of developing

customized system from scratch
to meet the needs of the firm.
 Basic types of commercial
software:

• Turnkey systems
• Backbone systems
• Vendor-supported systems
• ERP systems
 The Role of Accountants
Users
System Designers
System Auditors
 External Auditing
 Assurance Services
 IT Auditing
 Internal Auditing
 Organizational Structure
Business Segments – functional units of
business organizations

Common approaches of segmentation:

1. Geographical Location
2. Product Line
3. Business Function
 Accounting vs IT functions
ACCOUNTING FUNCTION IT FUNCTION
(END USER) (TECHNICAL SUPPORT)

• Manages financial • Database administration

information resource of
the firm • Data processing

• Distributes transaction • Systems development

information to and maintenance
operations personnel to
coordinate many of
their tasks
 Data Processing Models
Centralized Data Processing Distributed Data Processing

MARKETING
ACCOUNTING PRODUCTION
FINANCE
PRODUCTION

IT SERVICES

IT SERVICES IT SERVICES

DISTRIBUTION
ACCOUNTING

DATA INFORMATION COST CHARGEBACK

 Disadvantages of DDP
Mismanagement of
organization-wide resources
Hardware and software incompatibility
Redundant tasks
Consolidating incompatible activities
 Problems in hiring qualified
professionals
 Lack of standards
 Advantages of DDP
Cost reductions

Improved cost control responsibility

 Improved user
satisfaction

 Backup
Evolution of Information Systems
Models
The Manual Process Model

The Flat-File Model

The Database Model

The REA Model

Resources Events Agents

Enterprise Resource Planning Systems (ERP)

Evolution of Information Systems
Relative to Computing Technology

Mainframe and minicomputer computing

Personal computers

Client/server networks

Enterprise computing

Cloud computing
Mainframe and minicomputer
Personal computers
Client/server networks
Enterprise computing
Cloud computing
 The Role of Accountants
Users
System Designers
System Auditors
 External Auditing
 Assurance Services
 IT Auditing
 Internal Auditing
Designer/ Auditor
Duality
 Reading Articles
 The CPA and the Computer: Auditing in the Cloud:
Challenges and Opportunities (CPA Journal January 2012
by) Christina A. Nicolaou, Andreas I. Nicolaou and George D.
Nicolaou
 The CPA and the Computer: A Better Spreadsheet for
Internal Controls (CPA Journal April 2011 by Bruce Wampler
and Michelle McEacharn)
 The CPA and the Computer: Cloud Computing, Accounting ,
Auditing, and Beyond (CPA Journal October 2010 by Hui Du
and Yu Cong)
 Accounting Software Selection and Satisfaction: A Survey of
Accounting Professionals (CPA Journal January 2010 by
Susan H. Ivancevich, Daniel M. Ivancevich, and Fara Elikai)
 What the Enterprise Needs to know About Cloud
Computing (Accenture Technology Labs)
 Accounting Information Systems, 9th Edition by James A.
Hall
THANK YOU!