CH1.

AIS overview
• After studying this chapter, you should be able to:
1. Discuss the ch/c of useful information, and
explain how to determine the value of info.
2. By taking an organization: explain the decisions
they make, the info they need, and their major
business processes
3. Explain how an AIS adds value to an organization,
how it affects and is affected by corporate
strategy, and its role in a value chain.
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 1. What Makes Information Useful?
Characteristics that make information useful:
1. Relevant: information needed to make a decision
(e.g., the decision to extend customer credit would
need relevant information on customer balance
from an A/R aging report)
2. Reliable: information free from bias
3. Complete: does not omit important aspects of
events or activities
4. Timely: information needs to be provided in time
to make the decision
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 What Makes Information Useful?

5. Understandable: information must be presented

in a meaningful manner
6. Verifiable: two independent people can produce
the same conclusion
7. Accessible: available when needed

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 IS problem (sources)
• Relevance problems: Look at the following symptoms:
▫ Many lengthy reports, Reports that are not used by
persons receiving them
▫ Lack of user complaints, when reports are not
produced and distributed
• Completeness problem: Look at the following symptoms:
▫ - When forms are incomplete
▫ - Auditor analysis of data entry errors shows a high
incidence of incomplete fields
• Correctness problem: Look if there are many
transactions with errors, and how many of the errors are
critical
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 • Security:
▫ When information is accessed by unauthorized person.
Security problem is usually discovered after security
has been breached. Thus security audit must be made
periodically but irregularly. So that potential security
problems are identified before they become a reality.
• Timeliness: look at
▫ How quickly the information is updated
▫ How fast is the system to respond to users request
• Usability: When the system is difficult to use
▫ Long training hrs, High error rate
▫ Increased users complain
▫ Increased workers absenteeism
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2. Organizational Decisions and Information Needed
Assume that you want to establish a small shop.
• (A) what decision will U make?
• (B) what info do U need to make the decisions?
• (C) What are the major business processes?

• Answer to each of these question depends on kind of

dep/t or organization. For example, consider
marketing, dept (next slide)

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Copyright © 2015 Pearson Education, Inc.
Why do we need to know these? System Concept 7
3. AIS capture info b/n a firm and its Internal and External
Parties

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What is its implication for an AIS design? 1-8
 4.Basic Business Processes
Any bus processes could be described in terms of four basic transaction
cycles:
1. The revenue cycle encompasses all transactions involving sales to
customers and the collection of cash receipts for those sales.
2. The expenditure cycle encompasses all transactions involving the
purchase and payment of merchandise sold, as well as other services it
consumes, such as rent and utilities.
3. The HR/payroll cycle encompasses all the transactions involving the
hiring, training, and payment of employees.
4. The financing cycle encompasses all transactions involving the
investment of capital in the company, borrowing money, payment of
interest, and loan repayments.
These four cycles interface with the general ledger and reporting system,
which consists of all activities related to the preparation of financial
statements and other managerial reports.
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 5. What Is an AIS?
• An AIS is a system that collects, records, stores,
and processes data about
▫ Agents, events, and resources to produce information
for decision makers.
▫ Provide enough internal control
• It can:
▫ Use advanced technology; or
▫ Be a simple paper-and-pencil system; or
▫ Be something in between.
• Technology is simply a tool to create, maintain, or
improve a system.
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 Why Study AIS?
• It is fundamental to Accounting: AIS focuses on:
– How the data is collected and transformed.
– How the availability, reliability, and accuracy of
the data is ensured.
• The skills are critical to career success:
• AIS courses compliment other IS courses:
• Other systems courses focus on design and implementation of IS,
databases, expert systems, and telecommunications.
• AIS courses focus on accountability and control.
• AIS courses impact corporate culture and strategy

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 6. How Does an AIS Add Value?
• By
▫ Making processing faster and more reliable
▫ Providing better service or advice
▫ Providing enhanced features,
▫ Having effective decisions means quality decisions
▫ Having efficient decisions means reducing costs of decision
making
▫ Sharing knowledge
▫ Improving the internal control structure
• Info Overload and role of IT
Challenge is:
how to measure the value/ impact/ contributions
gained from certain ICT products/ services
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 Info overload and role of IT (IS)
E.g, consider a big supermarket, which wants to:
• Keep track of 3,000 items sold in 100 stores and
determine what products are moving, at what time
of day, and under what weather conditions.
• Keep track of what and when customers buy to
make sure it has in stock the products most
frequently purchased.
• Track orders that are placed and filled three times a
day so that stores always have fresh food.

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 7. value perceptions/ measurements :Papers
1. Executives’ Perceptions of the Business Value of IT:
A Process-Oriented Approach.
• They developed a model to assess the impacts of IT
on critical business activities within the value chain
(see next slide).
2. Call for EoI from ECA
3. Business Value of Information Technology: A Study
of Electronic Data Interchange
▫ By measuring /estimating the dollar benefits of
improved information exchanges between a company
and its suppliers that result from using EDI.
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 Role of AIS over the value chain
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 4. Perceptions of the Value of a Management
Information System
• A method for determining the monetary value of
an existing MIS report is presented
5. Information Technology and Organizational
Performance: An Integrative Model of IT Business
Value
▫ They develop a model of IT business value based on
the resource-based view of the firm that integrates the
various strands of research into a single framework.

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Asst 1: 10 points. Attempt to measure the
impact/ benefits of:
• IFRS implementation in your org, if any.
• Any fiancé related system implementation

▫ While trying to do this asst, you might refer the

models discussed by previous papers (1-5, except no 2)

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 8. AIS design
Factors affecting the design of AIS

How:
- Organizational culture
- Business strategy and
- Devt in IT affect the design of AIS?..eg, how the
internet affects strategy of orgs?

- The figure shows that organizational culture and

the design of an AIS influence one another. What
does this imply about the degree to which an
innovative system developed by one company can
be transferred to another company?

- The figure shows that developments in IT affect

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both an organization’s strategy and the design of
its AIS. How can a company determine whether it
is spending too much, too little, or just enough on
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IT?
 AIS and Strategy & key Questions
• A strategy is the overall goal the organization hopes to
achieve its goals (e.g., increase profitability).
• So how AIS contribute towards achieving organ goal?
• What are the implications of AIS in my business operations?
Today? In the future?
• What are the alternative perspectives for leveraging AIS
capabilities for business operations?
• What is the executive role of senior management
• for leveraging AIS capabilities?
• How should the AIS function be organized, and what is the
role of AIS outsourcing?
• What are the appropriate criteria for assessing AIS benefits?

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 Forces driving profitability of the mkte

What kind of AIS do

we need to crate to
combat the challenge
from the above forces?

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 Assignment 2: 10 points
• Select any organization of your interest and
document their AIS strategy? Identify its weakness
and strength. If there is no AIS strategy, attempt to
develop one.
▫ Note the scope of this task might be departmental or
organizational, depending on size of the org you
select

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 Exercise
1.You and your classmates decided to become entrepreneurs.
You came up with a great idea for a new mobile phone
application that you think will make lots of money. Your
business plan won second place in a local competition, and
you are using the $10,000 prize to support yourselves as you
start your company.
a. Identify the key decisions you need to make to be successful
entrepreneurs, the information you need to make them, and
the business processes you will need to engage in.
b. Your company will need to exchange information with
various external parties. Identify the external parties, and
specify the info received from and sent to each of them.

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 2. IT enables organizations to easily collect large amounts of information
about employees. Discuss the following issues:
A. To what extent should management monitor employees’ e-mail?
B. To what extent should management monitor which websites employees
visit?
C. To what extent should management monitor employee performance by,
for example, using software to track keystrokes per hour or some other
unit of time? If such information is collected, how should it be used?
D. Under what circumstances and to whom is it appropriate for a company
to distribute information it collects about the people who visit its
website?

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 3. IT is continually changing the nature of accounting
and the role of accountants. Write a one-page
report describing what you think the nature of the
accounting function and the AIS in a large company
will be like in the year 2030.

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 4. Have you ever imagined having one electronic device that does
everything you would ever need? Mobile phone makers in Japan have
gone beyond the imagining phase. Cell phones in Japan are becoming
more versatile than ever. Newer models of cell phones contain a myriad
of applications and can do many of the things that a personal computer
(PC) can do. PCs are also able to function as phones. A growing number
of professionals are trading in their laptops for handheld computers. Cell
phone manufacturers in the United States and elsewhere are quickly
catching up to their Japanese counterparts.
Required
a. What commercial activities can be done with a cell phone? With a cell
phone/PC combination device? What do you do when you’re on your cell
phone? What do you expect to be doing in five years?
b. How can businesses utilize this technology to attract more customers, sell
more products, advertise their products, facilitate the sale of products,
and conduct and manage their businesses more efficiently and
effectively?
c. What
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Education, Inc. or drawbacks you can see with using these
devices in business? 25