Key Features

CONCEPTUAL FRAMEWORK

This book employs a conceptual framework to emphasize the professional and legal responsibility of
accountants, auditors, and management for the design, operation, and control of AIS applications. This
responsibility pertains to business events that are narrowly defined as financial transactions. Systems
that process nonfinancial transactions are not subject to the standards of internal control under
Sarbanes-Oxley legislation. Supporting the information needs of all users in a modern organization,
however, requires systems that integrate both accounting and nonaccounting functions. While providing
the organization with unquestioned benefit, a potential consequence of such integration is a loss of
control due to the blurring of the lines that traditionally separate AIS from non-AIS functions. The
conceptual framework presented in this book distinguishes AIS applications that are legally subject to
specific internal control standards.

Chapter 2, ‘‘Introduction to Transaction Processing’’

This chapter has been updated to include a discussion of data coding schemes and their role in
transaction processing and AIS as a means of coordinating and managing a firm’s transactions. The
chapter presents the advantages and disadvantages of the major types of numeric and alphabetic
coding schemes. In the sixth edition, this material was included in Chapter 8; it was moved in this edition
because of its relevance as an element of transaction processing.

Organization and Content

PART I: OVERVIEW OF ACCOUNTING INFORMATION SYSTEMS
Chapter 1, ‘‘The Information System: An Accountant’s Perspective’
Chapter 1 - places the subject of accounting information systems in perspective for accountants. It is
divided into four major sections, each dealing with a different aspect of information systems.

• The first section explores the information environment of the firm. It introduces basic systems
concepts, identifies the types of information used in business, describes the flow of information through
an enterprise, and presents a framework for viewing accounting information systems in relation to other
information systems components.

types of information used in business:

Executive Support System (ESS)

The Executive support system helps to senior management to decide business strategic plan and to make decision
based on strategy. ESS helps to gather and analyses the internal and external information used in businesses. ESS is a
like instrumental panel in air craft cockpit which is showing the status of all the key business activities to senior
management team of organization. ESS provides the analysis tool that predicts a series of performance outcomes
overtime using input data. This type of ESS is useful to executive staff, it provides possible outcomes and quick
reference to statistics and numbers needed for decision-making.
Management Information System (MIS)

A management information system is a system or process that provides the information necessary to manage
organization effectively. MIS is planned system of collecting; processing and storing. Management information system
is mainly concern with the internal source of information in organization. Management information system analyzes
data captured from transaction processing system and creates reports based for decision making. The report generate
by MIS will be used by middle management and operational supervisor. MIS is very useful to generate reports for
example, financial statements , inventory status report, performance report for routine or non routine processes. It is
very important to manage the flow of information in organization for the future development of the business. The
Management information system helps to big organization to manage the information interchanging between
different departments such as store and distribution center.

Decision Support System (DSS)

Decision Support Systems (DSS) are specifically design to help management for decision making in
situation where there is uncertainty about possible outcomes of those decision. It is important to
implement decision support system in business because it supports business and organizational decision
making activities. The properly designed decision support system is an interactive software based system
intended to help decision maker to compile useful information from raw data. Decision support system
helps to enhance the abilities of decision maker or group of decision maker to make decision in favor of
company’s development. Furthermore, Decision support systems are call of computerized information
system that supports decision making activities. The decision support system can be classified in to five
different types which are:

1. Communication driven DSS

2. Data driven DSS
3. Document driven DSS
4. Knowledge driven DSS
5. Model driven DSS

Knowledge Management System (KMS)

Knowledge Management system helps businesses to create and share information. This types of system
used in organization where employee creates knowledge and expertise which can then be shared by other
people in organization to create commercial opportunities. The examples of the knowledge management
systems are Firms of Lawyers associated with organization, Accountants and management consultants
Knowledge system generally built around which allows efficient categorization and distributions of
knowledge. Knowledge Management system enables employee to have ready access of organization’s
documents’ based of fact. Now days, it not an optional to use knowledge management System for an
organization whether it is public or private big or small. Knowledge management system provides aid
to organization to creating, sharing and processing knowledge.

• The second section deals with the impact of organizational structure on AIS. The centralized and
distributed models are used to illustrate extreme cases.
• The third section reviews the evolution of information systems models. Accounting information
systems are represented by a number of different approaches or models. Five dominant models are
examined: manual processes; flat-file systems; the database approach; the resources, events, agents
(REA) model; and enterprise resource planning (ERP) systems.

• The final section discusses the role of accountants as users, designers, and auditors of AIS. The
nature of the responsibilities shared by accountants and computer professionals for developing AIS
applications are examined.

Chapter 2, ‘‘Introduction to Transaction Processing’’ Chapter 2 divides the treatment of

transaction processing systems into five major sections.
• The first section provides an overview of transaction processing, showing its vital role as an
information provider for financial reporting, internal management reporting, and the support of day-to-
day operations. Three transaction cycles account for most of a firm’s economic activity: the revenue
cycle, the expenditure cycle, and the conversion cycle.

• The second section describes the relationship among accounting records in both manual and
computer-based systems.

• The third section of the chapter presents an overview of documentation techniques used to describe
the key features of systems. Five types of documentation are commonly used: data flow diagrams, entity
relationship diagrams, system flowcharts, program flowcharts, and record layout diagrams.

• The fourth section presents two computer-based transaction processing systems— batch processing
using real-time data collection and real-time processing—and the operational efficiency issues
associated with each.

• The final section examines data coding schemes, their role in transaction processing and AIS as a
means of coordinating and managing a firm’s transactions, and the xx Preface advantages and
disadvantages of the major types of numeric and alphabetic coding schemes