B) REVIEW QUESTIONS

1. What are the four levels of activity in the pyramid representing the business
organization? Distinguish between horizontal and vertical flows of information

* Top Management
* Middle Management
* Operations Management
* Operation Personnel
- The horizontal flow supports operations-level tasks with highly detailed information about
the many business transactions affecting the firm while the vertical flow distributes
information downward from senior managers to junior managers and operation
personnel in the form of instructions, quotas, budgets.

2. Distinguish between natural and artificial systems.

- Natural systems stem from the atom, while artificial systems are put together by humans.

3. What are the elements of a system?

- MULTIPLE COMPONENTS: a system must contain more than one part.

- RELATEDNESS: a common purpose relates the multiple parts of the systems.
- SUBSYSTEM: subsystem when viewed in relation to the larger system.
- PURPOSE: a system must serve atleast one purpose.
- INTERDEPENDENCY

4. What is system decomposition and subsystem interdependency? How are they

related?

- system decomposition refers to the process of breaking down the system into smaller,
cohesive, and well-defined subsystems. Each subsystem is designed to handle certain
types of transactions. These subsystems include accounts payable, accounts receivable,
inventory, payroll, general ledger, and reporting2.
- On the other hand, subsystem interdependency refers to the harmonious interaction and
effective functioning of these subsystems to achieve the overall goal of the system34. If
a vital subsystem fails or becomes defective and can no longer meet its specific
objective, the overall system will fail to meet its objectives.

5. What is the relationship among data, information, and an information system?

- Data are facts, which may or may not be processed (edited, summarized, or refined) and
have no direct effect on a user's actions. Information causes the user to take an action
 that he or she otherwise could not, or would not, have taken. Information is determined
by the effect it has on the user. Thus the relation is an information system is the act of
formal procedures by which data are collected, stored, processed into information, and
distributed to users.

6. Distinguish between AIS and MIS

- The distinction between AIS and MIS centers on the concept of a transaction. AIS
subsystems process financial transactions and non financial transactions that directly
affect the processing of financial transactions (changes to customers' names and
addresses are processed by the AIS to keep the customer file current. Although not
technically a financial transaction these changes provide vital information for processing
future sales). MIS processes nonfinancial transactions that are not normally processed
by traditional IS. MIS manages the information systems for specialized functional areas
such as production planning and control, sales forecasting, inventory warehouse
planning, market research, and so on.

7. What are the three cycles of transaction processing systems?

- The revenue cycle (subsystems: sales processing, cash receipts), the expenditure cycle
(buying, cash disbursements, payroll processing), and the conversion cycle (transforms
input resources, raw materials, labor, and overhead into finished products or services for
sale) are the three cycles of transaction processing systems.

8. What is discretionary reporting?

- Reporting in which the organization can choose what information to report and how to
present it. Typically these are reports generated for internal use.

9. What are the characteristics of good or useful information?

- relevance (serves a purpose), timeliness (no older than the time frame of the action),
accuracy (free from error), completeness (no essential information missing), and
summarization (detailed vs not detailed depending on recipient of information).

10. What rules govern data collection?

- RELEVANCE: The information system should capture only relevant data. A fundamental
task of the system designer is to determine what is and what is not relevant. He or she
 does so by analyzing the user’s needs. Only data that ultimately contribute to information
(as defined previously) are relevant. The data collection stage should be designed to
filter irrelevant facts from the system.
- EFFICIENCY: Efficient data collection procedures are designed to collect data only once.
These data can then be made available to multiple users. Capturing the same data more
than once leads to data redundancy and inconsistency. Information systems have limited
collection, processing, and data storage capacity. Data redundancy overloads facilities
and reduces the overall efficiency of the system. Inconsistency among redundant data
elements can result in inappropriate actions and bad decisions.

11. What are the levels of data hierarchy?

- DATA ATTRIBUTE: The data attribute is the most elemental piece of potentially useful
data in the database. An attribute is a logical and relevant characteristic of an entity
about which the firm captures data. The attributes shown in Figure 1-6 are logical
because they all relate sensibly to a common entity— accounts receivable (AR). Each
attribute is also relevant because it contributes to the information content of the entire
set. As proof of this, the absence of any single relevant attribute diminishes or destroys
the information content of the set. The addition of irrelevant or illogical data would not
enhance the informa- tion content of the set.
- RECORD: A record is a complete set of attributes for a single occurrence within an entity
class. For example, a particular customer’s name, address, and account balance is one
occurrence (or record) within the AR class. To find a particular record within the
database, we must be able to identify it uniquely. Therefore, every record in the
database must be unique in at least one attribute.1 This unique identifier at- tribute is the
primary key. Because no natural attribute (such as customer name) can guarantee
unique- ness, we typically assign artificial keys to records.
- FILES: A record is a complete set of attributes for a single occurrence within an entity
class. For example, a particular customer’s name, address, and account balance is one
occurrence (or record) within the AR class. To find a particular record within the
database, we must be able to identify it uniquely. Therefore, every record in the
database must be unique in at least one attribute.1 This unique identifier at- tribute is the
primary key. Because no natural attribute (such as customer name) can guarantee
unique- ness, we typically assign artificial keys to records.
- DATABASE

12. What are the three fundamental tasks of database management?

- The three fundamental tasks for database management are storage, retrieval, and
deletion. Storage is when data is in its proper location. Retrieval is about locating and
extracting a record. Deletion occurs when obsolete records are permanently removed.
13. What is feedback and how is it useful in information?

- Feedback, which can be internal or external, is a type of output that is sent back to the
system as a data source. It is beneficial to an information system since it informs you of
what has to be done or the steps that should be followed. A process can be started or
changed via feedback. Feedback is a type of output that is returned to the system as a
data source. feedback Is useful because it can be used to start a process.

14. What are the fundamental objectives of all information systems?

- To support stewardship function of management

- To support the decision-making processes of managers, and
- To support the day-to-day operations of the firm

15. What does stewardship mean and what is its role in an information system?

- Stewardship is the responsibility of management to properly utilize the resources of the

firm entrusted to them. Information systems provide management with reports to better
manage the resources and also provide responsibility reports by which management
may be evaluated.

16. Distinguish between responsibility, authority, and accountability. Which flow upward
and which flow downward?

- Authority is the right of an individual to command his subordinates and take actions
within the limits of the power allocated to him. It arises as a result of a formal position in
an organization. As a supervisor has authority over his or her subordinates, authority
flows from top to bottom. Responsibility, on the other hand, is the obligation of a
subordinate to do the work assigned correctly. It stems from the superior-subordinate
relationship, since a subordinate is obligated to complete the work assigned to him by
the superior. Responsibility is distributed from the bottom to the top. And accountability is
the obligation to carry out responsibility or be answerable for the appointed work. A
subordinate will be held accountable and liable for the work allocated to him.
Accountability cannot be denied once authority is delegated and responsibility is
accepted. It also flows upwards, i.e. A subordinate is responsible for the work assigned
to him.

17. Distinguish between turnkey, backbone, and vendor-supported systems.

- Turnkey Systems are complete systems that are ready to use once installed. They are
typically sold as a package that includes both software and hardware, and are often
developed by vendors who specialize in a particular industry.
 - Backbone Systems, on the other hand, provide a basic structure or framework on which
additional features and functionalities can be built. They offer a compromise between a
fully custom system and a turnkey system, allowing for some level of customization while
still providing a solid foundation.
- Vendor-Supported Systems are custom systems that are purchased from a vendor
rather than developed in-house. These systems offer the advantage of being tailored to
the specific needs of the organization, but with the added benefit of vendor support for
implementation, maintenance, and troubleshooting.

18. List each of the functional areas and their sub-function.

- A. Materials Management
1. Purchasing
2. Receiving
3. stores
B. production
1. Production planning
2. Quality control
3. maintenance
C. marketing
1. Advertising
2. Market research
3. Sales order processing
d. Distribution
1. Warehousing
2. Shipping
e. Personnel
1. recruiting
2. Training
3. Benefits
4. Counseling
f. Finance
1. portfolio management
2. Treasury
3. Credit
4. cash disbursement
5. cash receipt
g. Accounting
1. inventory control
2. cost accounting
3. Payroll
4. accounts payable
5. accounts receivable
6. Billing
 7. fixed-asset accounting
8. general ledger
h. Computer Service
1. data processing
2. systems development and maintenance
3. database administration

19. What are the roles of internal and external auditors?

- internal auditors, who are employees of the organization, conduct financial audits,
examine compliance with policies and laws, evaluate operational efficiency, and detect
fraud. External auditors, who are independent CPA professionals, audit financial
statements, inspect internal systems and controls, assess risk management tactics, and
perform audits of non-financial areas.
- Internal auditors are responsible for in-house appraisal of the financial reporting system.
Internal auditors are concerned with deterring and detecting fraud and for conducting
EDP audits. External auditors are independent CPAs engaged by the firm to attest to
the completeness and accuracy of the financial statements. External auditors work
together with the internal auditors.

20. What is the role of a database administrator?

- A Database Administrator (DBA) in an Accounting Information System (AIS) is

responsible for maintaining, securing, and operating databases. They ensure accurate
storage and retrieval of data, work with developers to design and implement new
features, troubleshoot issues, and manage database availability and performance. They
also handle tasks like creating database standards and policies, supporting database
design, administering database objects, defining event triggers, performing database
housekeeping, monitoring usage and transaction volumes, and managing database
security issues. Additionally, they design database backup, archiving, and storage
strategies.

21. Name the three most common ways to segment an organization.

- Geographic location, product lines, and function.

22. What is the role of the accounting function in an organization?

- The accounting function in an organization, particularly in an Accounting Information

System (AIS), is responsible for storing and analyzing financial information, overseeing
monetary transactions, preparing financial statements, managing accounts receivable
and payable, handling payroll, and preparing financial reports. It tracks business
 spending, ensures timely payment of funds, and creates a fiscal history for the company.
It also aids in predicting financial success and future needs of the company to create
budgets and seize new growth opportunities.

23. Distinguish between the centralized and distributed approaches to organizing the IT
function.

In an Accounting Information System (AIS), the IT function can be organized using a centralized
or distributed approach. The centralized approach involves locating all IT resources and
functions in a single location, allowing for more control and consistency. On the other hand, the
distributed approach divides the central IT function into smaller units controlled by end users,
offering more flexibility and tailored IT solutions.

24. What is the role of the data control group?

to receive batches of transaction documents for processing. They ensure that the data is
correctly entered, treated, and retrieved. They also set up specific measures and rules for data
entry. This group plays a crucial role in maintaining the integrity and accuracy of the data in the
system.

25. What is distributed data processing?

Distributed Data Processing (DDP) in an Accounting Information System (AIS) is an alternative

to the centralized model. It involves reorganizing the IT function into small IT units that are
placed under the control of end users. DDP diverges massive amounts of data to several
different nodes running in a cluster for processing. All the nodes work in conjunction to execute
the task allotted parallelly, connected by a network. The entire setup is scalable and highly
available

26. What are the advantages and disadvantages of distributed data processing?

Distributed Data Processing (DDP) in an Accounting Information System (AIS) offers

advantages such as cost reductions, improved performance, optimized processing, scalability,
flexibility, and parallel processing. However, it also has disadvantages including high software
costs, large overhead, difficulty in troubleshooting, designing, and administrating, challenges in
planning data synchronization, and reduced local accountability.
27. What types of tasks become redundant in a distributed data processing system?

In a distributed data processing system in an Accounting Information System (AIS), redundant

tasks often occur when autonomous systems development initiatives are distributed throughout
the firm. This can result in each user area reinventing the wheel rather than benefiting from the
work of others. For example, application programs created by one user, which could be used
with little or no change by others, will be redesigned from scratch rather than shared. Likewise,
data common to many users may be recreated for each, resulting in a high level of data
redundancy

28. What is a flat-file system?

A flat-file system in an Accounting Information System (AIS) is a single-view model that
characterizes legacy systems in which data files are structured, formatted, and arranged to suit
the specific needs of the owner or primary user of the system. In contrast to a hierarchical file
system, in a flat file system every file must have a different name because there is only one list
of files. These primitive file systems were mostly used in early computing systems prior to the
development of the hierarchical file systems that are used today.

29. What are the three general problems associated

with data redundancy?
Data redundancy in an Accounting Information System (AIS) can lead to three general
problems. First, it can result in increased data storage as the same data is stored in multiple
files. Second, it can lead to increased data updating. This is because changes must be made to
multiple files, which can be time-consuming and computationally costly. Lastly, it can result in
the possibility of noncurrent data. If all instances of redundant data are not updated, it can lead
to decisions being made based on outdated information.

30. Define the key elements of the REA model.

The REA model in Accounting Information Systems (AIS) is a framework for capturing an
organization’s resources, events, and agents, and their relationships. Resources are economic
assets that are scarce and controlled by the organization. Events are phenomena that affect
changes in these resources, representing business activities where resources are consumed or
produced. Agents are individuals or departments that participate in these events. The REA
model allows both accounting and non-accounting data about these elements to be identified,
captured, and stored in a relational database, providing a comprehensive view of an
organization’s business processes.
31. What is an ERP system?

An Enterprise Resource Planning (ERP) system is a comprehensive software that integrates

various business functions. It allows interlinking of all departments in an organization,
automating many regular processes. In the context of Accounting Information Systems (AIS), an
ERP system can influence the application of different accounting methodologies and the
accounting profession, influencing data processing, recording, and the preparation and
publication of financial reports. Most ERP products today come with accounting software as an
entry-level package known as an ERP accounting system.

32. What three roles are played by accountants with respect to the information system?

- Accountants perform three important roles in information systems: designers,

implementers, and auditors. Accountants play a significant role in the development of
accounting information systems. They are the most qualified and well-equipped
individuals to develop the information system. They are implementers because
accountants are responsible for ensuring that the designed accounting information
systems are actually implemented. They may uncover a fault with the implementation
that non-accountants may find difficult to explain back to the system designers. Finally,
accountants audit the already-acclaimed accounting information systems to check that
what has been claimed to be implemented is actually followed.

33. Define the term attest function.

- This refers to the process of a third party performing an inspection of an entity's financial
statements, with the result being the third party's formal certification that the financial
statements fairly portray the entity's financial results and financial situation. It is critical
because it assures stakeholders that the financial information supplied by internal
accountants is accurate and reliable.

34. Define the term assurance.

- Assurance refers to steps that ensure the availability, integrity, authenticity,

confidentiality, and non-repudiation of information and information systems. These
methods include incorporating protection, detection, and reaction capabilities to allow for
the restoration of information systems. It is about having faith that the controls in place
will lower the projected risks.

35. What is IT auditing?

 - IT auditing in information systems is the examination and evaluation of an organization’s
information technology infrastructure, applications, data use and management, policies,
procedures, and operational processes against recognized standards or established
policies. They are the ones who are responsible for analyzing and assessing a
company’s technological infrastructure to ensure processes and systems run accurately
and efficiently while remaining secure and meeting compliance regulations. Their goal is
to evaluate if the controls to protect information technology assets ensure integrity and
are aligned with organizational goals and objectives.

36. Distinguish between conceptual and physical systems.

In Accounting Information Systems (AIS), a conceptual system is the theoretical framework that
defines how data should be collected, processed, and stored. It consists of ideas or theories
and involves processes performed by external physical systems. On the other hand, a physical
system refers to the actual hardware and software used to implement the conceptual system. It
consists of matter and energy and can perform and manage processes internal to the system.
Essentially, while a conceptual system provides the theoretical foundation for how an AIS should
operate, a physical system represents the tangible elements that put these theories into
practice.

DISCUSSION QUESTIONS

1. Discuss the differences between internal and external users of information and their
needs and demands on an information system. Historically, which type of user has
the firm catered to most?
- The reporting requirements of external users such as lending institutions, the IRS,
the SEC, and stockholders are subject to stringent reporting standards. Thus,
firms have historically placed a very high emphasis on the accuracy of the AISs
and the reports they produce for external agencies since failure to provide
accurate and timely information carries heavy penalties. Internal users, such as
managers, also need vital information to make good decisions. Firms are
beginning to realize that the needs of these internal users are also very important
to efficiently and effectively operate and plan for the future.

2. Comment on the level of detail necessary for operations management, middle

management, and stockholders.
- The level of detail necessary for the stockholders is highly aggregated and
typically follows the format prescribed by the SEC and GAAP. Much more detailed
information is necessary for middle management to plan and control operations.
Highly detailed information is needed at the operations management level in order
to run the day-to-day business processes and operations.
3. Distinguish between financial and nonfinancial transactions. Give three examples of
each.
- Financial transactions affect the accounts in the balance sheet in some manner. Three
examples are 1) use of equipment-depreciation, 2) payment of a bond payable, and 3)
receipt of cash from a customer for a sale previously made on account. Nonfinancial
transactions include business events that do not impact the financial statements. Three
examples are 1) a book checked out by a student in a school library, 2) the recording of
a customer complaint via a toll-free hotline, and 3) status reports of research and
development projects.

4. Why have re-engineering efforts been made to integrate AIS and MIS?
- Managers of all areas typically need data from both the AIS and the MIS. If the
data needed by managers for decision-making processes are located in two or
more datasets, the preparation of reports is both inefficient and expensive.
Further, a lack of coordination between the two datasets can result in data that is
not consistent and is unreliable.

5. Do you think transaction processing systems differ significantly between service and
manufacturing industries? Are they equally important to both sectors?
- The transaction processing systems only differ in the types of data elements
collected. Both service and manufacturing industries need to collect data regarding
business processes. While a manufacturing firm may collect data regarding the
amount of scrap generated at a particular workstation, a service firm, such as a
public accounting firm, needs to collect data regarding the number of hours spent
by staff to verify cash balances. Transaction processing systems are equally
important to both types of industries.

6. Discuss the difference between the financial reporting system and general ledger
system.
- The General Ledger System (GLS) summarizes all of the transaction cycle activity
and general journal entries. The GLS provides most of the input in the Financial
Reporting System (FRS). The FRS communicates information from the GLS to the
external users. The FRS often collects additional pieces of information other than
that which is found in the GLS. An example of this is when a pending lawsuit is
likely to be settled in the next year. The GLS would not have this information.

7. Examine Figure 1-5 and discuss where and how problems can arise that can cause the
resulting information to be bad or ineffective.
- If the collected data are not accurate and/or not correctly entered, then the
resulting information will not be accurate. Also, if the data processing system is not
correctly processing the information, then the resulting information will also be
incorrect. If the database is not accurately maintained over time, again the
resulting information will be incorrect.
8. Discuss how the elements of efficiency, effectiveness, and flexibility are crucial to the
design of an information system.
- Efficiency is crucial to an AIS. The cost of collecting and producing information
should not outweigh its benefits. Further, the applications should be run in a
manner that places the least strain on the overall system. For example, the
printing of checks to vendors should not be done during the day if it slows down
the online sales order processing system in a multitasking environment.
In order for a system to be effective, the appropriate data should be processed,
and the resulting information disseminated to the appropriate users. For example,
an accounts receivable delinquent report should be sent to the collection
department in a timely fashion, so that measures can be taken to collect the funds.
The ability to react to a change is very important, especially in an FRS where
reporting requirements and standards change frequently.

9. Discuss what is meant by the statement, ‘‘The accounting system is a conceptual flow
of information that represents the physical flows of personnel, raw materials, machinery,
and cash through the organization.’’
- This statement means that the accounting system is a representation of the
operations of a firm. As machines operate, workers perform their duties, raw
materials are transferred into finished goods and cash flows are exchanged
between suppliers and customers, the accounting system must be continuously
updated to accurately reflect these actions. This conceptual flow is crucial because
it allows management to view in summary and in detail the financial effects of
these operations on the firm.

10. Discuss the importance of accounting independence in accounting information

systems. Give an example of where this concept is important (use an example other than
inventory control).
- Accounting independence is important because the separation between the
record-keeping functions and the physical resources is crucial. This concept is
extremely important for cash receipts operations. The person in charge of deposits
of currency and check receipts should not be allowed to reconcile the sales
records to the cash deposits and/or the bank account. If these duties are not
separated, then the cash receipts clerk can steal money and cover it up during the
reconciliation process.

11. Discuss why it is crucial that internal auditors report solely to the uppermost level of
management (either to the chief executive officer or the audit committee of the board of
directors) and answer to no other group
- The internal auditors are responsible for detecting and pursuing fraud within the
firm. If management-level employees are involved, the internal auditors may fear
losing their jobs if they blow the whistle on such activities. Thus, the internal
auditors should report to the board of directors so that they do not fear any
repercussions of their actions from top management.

12. Contrast centralized data processing with distributed data processing. How do the
roles of systems professionals and end users change? What do you think the trend is
today?
- In a centralized data-processing environment, the computer services personnel
are all housed in one department where all of the systems development and
maintenance takes place. End users must formally request any additions or
enhancements to the current system. In a distributed data processing (DDP)
system, the systems professionals may still be housed together or they may be
located throughout the various segments of the organization. End users gain more
control over their data and applications. DDP is becoming more and more popular
as networking computers is becoming easier and more commonplace.

13. Discuss how conceptual and physical systems differ and which functions are
responsible for each of these systems
- The conceptual system represents the logic and decision rules to be applied, while
the physical system represents the means of accomplishing the tasks. Many
different possibilities (physical systems) may be available to accomplish the
conceptual system. The accountant is important in the design of the conceptual
system; however, system designers may dominate in the tasks of physical design
because of the technical nature of the solution. The accountant should still be
involved in the process, although he/she may only participate in an advisory role.

14. If accountants are viewed as providers of information, then why are they consulted
as system users in the systems development process?
- Accountants, although providers of financial information to both internal and
external users, are still the primary “users” of the AIS. The accountants oversee
the data collection, processing, and output of the AIS. Thus, as new AISs are
developed by system professionals, accountants’ needs as seen from the
viewpoint of a user are very important. Thus, the accountants guide the systems
developers by conveying their needs and constraints.

15. Do you agree with the statement, ‘‘The term IT auditor should be considered obsolete
because it implies a distinction between regular auditors and auditors who examine
computerized AIS’’? Why or why not?
- Yes and No. Virtually all publicly traded firms have computerized AISs as well as
most small- and medium-sized firms. Audits of non-computerized systems are
becoming rare. Thus, one may say that virtually all auditors must deal with
electronic processing of data. However, certain auditing personnel, known as IT
auditors, have special skills, which allow them to focus on the computer
“processing.” Thus, distinguishing these auditors from auditors who do not have
such skills may still be appropriate.
16. What are the primary reasons for segmenting organizations?
- Organizations are segmented in order to promote internal efficiencies. These
internal efficiencies occur as a result of localized control over resources and also
by specialization of labor. Localized control over resources allows the managers of
those resources to have increased responsibility and authority. Hopefully, these
management teams understand the segment’s operating environment better than
anyone else in the organization. If this is true, they should be able to make the
best allocation of resources. Geographic location is also important, especially in a
global economy where firms operate in many different cultures. The local
management team should be in the best position to make cost-effective resource
Allocations.

17. Why is it important to organizationally separate the accounting function from other
functions of the organization?
- The accounting function provides record-keeping services for all of the operations
and day-to-day activities of other departments, which affect the financial position of
the organization. Record-keeping tasks must be kept separate from any area that
has custody over assets. Thus, the accounting function must remain independent
so that the protection of the firm’s assets is carried out in an environment with
minimum possibilities for theft.

18. What is the most likely system acquisition method— in-house, turnkey, backbone, or
vendor-supported— for each of the following situations?
A plumbing supply company with 12 employees that sells standard products to
wholesale customers in a local community needs a system to manage its affairs.
A major oil company with diverse holdings, complex oil leases, and esoteric accounting
practices needs a system that can coordinate its many enterprises.
A municipal government needs a system that complies with standard government
accounting practices but can be integrated with other existing systems
- Turnkey. These are completely finished and tested systems that are ready for
implementation. Typically, they are general-purpose systems or systems
customized to a specific industry. Typically the end user will have standard
business practices that permit the use of “canned” or “off-the-shelf” systems that
can be employed with little or no modification.
In-house. Larger organizations with unique and frequently changing needs
engage in in-house development. The formal process by which this is
accomplished is called the system development life cycle.
Backbone. Backbone systems consist of a basic system structure on which to
build. The primary processing logic is preprogrammed, and the vendor then
designs the user interfaces to suit the client’s unique needs. A backbone system is
a compromise between a custom system and a turnkey system.
19. The REA model is based on the premise that ‘‘business data must not be
preformatted or artificially constrained and must reflect all relevant aspects of the
underlying economic events.’’ What does this mean and how is it applied?
- The REA model requires that accounting phenomena be characterized in a
manner consistent with the development of multiple user views not simply those of
the accounting function. As such, REA procedures and databases are structured
around events rather than accounting artifacts such as journals, ledgers, charts-of-
accounts, and double-entry accounting. Under the REA model, business
organizations prepare financial statements directly from the event database.

20. ERP systems are composed of a highly integrated set of standardized modules.
Discuss the advantages and potential disadvantages of this approach.
- Advantages of ERP
• Enterprise Resource Planning (ERP) systems enable organizations to
automate and integrate key business processes.
• ERPs break down traditional functional barriers by facilitating data sharing.
• ERP software embodies and supports the best business practices of a given
industry, thus encouraging positive changes in the way firms do business.
• Organizations experience internal efficiencies by employing standard business
practices among all organizational units.
Disadvantages of ERP
• The implementation of an ERP system can be a massive undertaking that can
span several years.
• Because of their complexity and size, few organizations are willing or able to
commit the necessary financial resources and incur the risk of developing an
ERP system in-house. Hence, virtually all ERPs are commercial products
designed to solve standardized business problems. Many organizations have
unique needs that require customized systems.
• Organizations that implement an ERP often need to modify their business
processes to suit the ERP. Often, additional software applications need to be
connected to the ERP to handle unique business functions, particularly
industry-specific tasks. These applications, often called bolt-ons, are not
always designed to communicate with ERP packages.
• ERP packages are enormously expensive. Organization management should

MULTIPLE CHOICE QUESTIONS

1. C
Explanation: financial transaction is an administrative or data management task related to
maintaining vendor information.
Other options involve actual financial transactions like purchasing products, receiving cash, and
selling inventory, which directly impact an organization’s financial records.
2. B
Explanation: Human resources systems deal with personnel-related data and functions, which
are separate from the coe financial and accounting functions of AIS.
Other options are commonly recognized as components of AIS, with roles in processing
financial transactions (Transaction Processing System), managing the general ledger and
financial reporting (Ledger/Financial Reporting System), and providing management reporting
(Management Reporting System).
3. A
Explanation: TPS is primarily focused on recording and processing day-to-day transactions,
such as sales, purchases, and inventory changes. Managing financial investments typically falls
under the purview of a Financial Management information System or an Investment
Management System, which are distinct from TPS
4. D
Explanation: the primary objectives of the data collection activity in the general model for AIS
are to collect data that are efficient in terms of cost and time while also being relevant to the
organization's accounting and business processes. Efficient and relevant data collection
ensures that the information gathered serves the needs of the organization without unnecessary
redundancy or cost.
5. D
Explanation: precision is described as a degree through which an instrument continues to
repeat the measurement at a particular period of time.
6. C
Explanation: database management tasks usually involve retrieving, storing, updating, and
deleting data. Summarization often occurs as a separate data analysis or reporting activity after
data retrieval, where data is summarized or aggregated to provide insights or reports.
7. C
8. D
9. D
Explanation: information systems are designed to support various functions within an
organization, including stewardship, decision-making, and day-to-day operations. These
objectives help organizations effectively manage their resources, make informed decisions, and
carry out their daily activities.
10. D
Explanation: the material management function deals with the control and planning of inventory
materials. These activities are then divided into 3 sub functions such as purchasing, receiving,
and stores.
11. E
12. A
13. B
Explanation: the extent to which an organization adopts DDP depends on its management
philosophy and objectives. DDP can be implemented in various ways, and the level of the
distribution can vary based on the organization's goals and strategies.
14. C
Explanation: one of the disadvantages of distributed data processing is that it can lead to
increased potential for hardware and software incompatibility across different parts of the
organization. This can create challenges in terms of maintaining consistency and compatibility
across the distributed systems.