McGraw-Hill/Irwin

Accounting Information Systems © 2008 The McGraw-Hill Companies, Inc. All rights reserved.

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Accounting Information Systems:

Basic Concepts and Current Issues
1st edition

Robert L. Hurt

1-1
 Chapter 1
Role and Purpose of Accounting
Information Systems

ACCOUNTING INFORMATION SYSTEMS

BASIC CONCEPTS & CURRENT ISSUES
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 Outline
• Objectives
• Definition of accounting information systems
• FASB Conceptual Framework
• Typical AIS structure
• Information competence
• Textbook structure

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 Objectives
When you finish this chapter, you should be able to:
• Define “accounting information systems”
• Discuss why AIS is an important area of study for future accountants
• Compare and contrast AIS with other areas of study in accounting
• Explain the structure of most accounting information systems
• Locate and evaluate information sources on accounting information
systems
• Describe the structure and content of the remainder of this text

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 Definition of AIS
• Interrelated activities, documents and
technologies
• Collect data and process it
• Report information
• Diverse group of internal and external decision
makers

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 FASB Conceptual Framework
• Developed in 1977
• Well-designed AIS can respond to many
elements
• Components
• Objectives of financial reporting
• Elements of financial statements and qualitative
characteristics
• Assumptions, principles and constraints

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 FASB Conceptual Framework
• Objectives of financial reporting
• Framework lists multiple objectives
• For AIS study, the most important may be the most basic:
to provide information for decision making
• Elements of financial statements
• Balance sheet: assets, liabilities, equity
• Income statement: revenues, expenses, gains, losses
• Other: comprehensive income

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 FASB Conceptual Framework
• Qualitative characteristics
• Primary
• Relevance: information makes a difference in decisions
• Reliability: information can be relied upon for
decisions
• Secondary
• Comparability: between organizations
• Consistency: across time

ACCOUNTING INFORMATION SYSTEMS

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 FASB Conceptual Framework
• Assumptions
• Economic entity: a business is separate from its
owners
• Going concern: a business will survive long
enough to meet its current obligations
• Periodicity: the life of a business is divided into
time periods for financial reporting
• Monetary unit: the value of a dollar is stable

ACCOUNTING INFORMATION SYSTEMS

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BASIC CONCEPTS & CURRENT ISSUES
 FASB Conceptual Framework
• Principles
• Historical cost: in general, items in the AIS are
recorded at their historical cost
• Realization: revenue can be recorded in the AIS
when the earnings process is essentially complete
• Matching: expenses should appear on the income
statement with the revenue they helped generate
• Full disclosure: give decision makers all the
information they need

ACCOUNTING INFORMATION SYSTEMS

BASIC CONCEPTS & CURRENT ISSUES 1-10
 FASB Conceptual Framework
• Constraints
• Cost effectiveness: the benefit of having
information must exceed the cost of obtaining it
• Materiality: dollar amounts must be large enough
to make a difference in decisions
• Conservatism: when choosing between accounting
practices, make the choice that presents the “worst
case” scenario
• Industry practices: follow the conventions of the
industry in financial reporting

ACCOUNTING INFORMATION SYSTEMS

BASIC CONCEPTS & CURRENT ISSUES 1-11
 Typical AIS structure
• Inputs
Such as source documents
• Processes
Journals, ledgers,
information technology
• Outputs
General purpose financial
statements and other
reports
• Storage
Paper-based or electronic
• Internal controls
Designed to safeguard
assets, promote operating
efficiency, encourage
adherence to
management rules and
ensure reliable financial
reports

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BASIC CONCEPTS & CURRENT ISSUES 1-12
 Information competence
• Problems in accounting information systems
often have more than one “correct” answer
• In other words, they are non-deterministic
• But, some answers are clearly incorrect
• Research is often required to address problems
in AIS
• Therefore, accountants must be able to
evaluate information

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 Information competence
• Definition

Information competence is the ability to find,

evaluate, use, and communicate information in all

of its various formats (Curzon, 1995)

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 Information competence
• Types of information
• Sponsored / commercial
Someone has paid a fee or given other consideration
• Popular / practitioner
Has been reviewed. May be descriptive in nature.
• Scholarly
Has been reviewed. Typically intended for academic
audiences.

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 Information competence
• Criteria for evaluating information (UMUC)
• Authority
• Accuracy
• Objectivity
• Currency
• Coverage

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 Information competence
• Authority • Objectivity
• Who created the • Does the information
information? contain advertising?
• For what purpose? • Is it available freely?
• Accuracy
• Where did the
information come from?
• Any obvious factual
errors?

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 Information competence

• Currency • Coverage
• When was the • Is the information
information created / continually “under
written? construction?”
• When was it last • Does it provide sufficient
updated? depth?

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 Textbook structure
• Part One: Introduction
and Basic Concepts
• Nature and purpose of
AIS
• Transaction processing
• Professionalism and
ethics
• Internal control
• Part Two: Systems
Documentation and
Information Technology
• Flowcharting
• Data flow diagramming
and database design
• Information technology
tools

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 Textbook structure

• Part Three: Business • Part Four: Current

Processes Topics
• Sales / collection • Application service providers
• Acquisition / payment • Professional certifications
• Other • Event-driven systems
• Human resources • Computer crime and IT
• Conversion security
• Financing • XBRL
• Decision-making models and
knowledge management
• E-business and ERP systems
• Auditing and evaluating the
AIS

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