Chapter I - Introduction to

Accounting Information Systems

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 Textbook Themes
1. Enterprise systems— integrate the business
process functionality and information from all of an
organization’s functional areas, such as marketing
and sales, cash receipts, purchasing, cash
disbursements, human resources, production and
logistics, and business reporting (including financial
reporting).
2. E-Business—use of networks to undertake
business processes
3. Internal control— a system of integrated elements
that provide reasonable assurance that a business
will reach its business process goals

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 Chapter 1 Objectives
• To appreciate the complex, dynamic environment in which
accounting is practiced.
• To know the AIS, its relationship to the organizations
business processes
• To know the attributes of information
• To recognize how information is used for different types of
decisions and at various levels in the organization
• To recognize how the information system supports the
management function
• To recognize the accountant’s role in relation to the current
environment for AIS
• To understand how to use this textbook effectively to learn
AIS

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Elements in the Study of AIS

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 Sarbanes-Oxley Act of 2002
Section 404 –
• Management must identify, document, and
evaluate significant internal controls
• Auditors must report on management’s
assertions regarding internal controls
Section 409 –
• Requires disclosure to the public on a
“rapid and current” basis of material changes in
an organization’s financial condition.

Implications for both public and private accountants

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Accounting
System
and Sub-
systems

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 Accounting Systems and
Subsystems
• A system is a set of interdependent
elements that together accomplish
specific objectives.
• A subsystem is the interrelated parts
that have come together, or integrated,
as a single system, which we have
named System 1.0.

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 Information System Model
• An information system (IS) (or management
information system [MIS]) is a manmade
system that generally consists of an integrated
set of computer-based and manual components
established to collect, store, and manage data
and to provide output information to users.
• The Figure on the next slide depicts the
functional components of an information system.

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Information System Model

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 Purpose of AIS
• Collect, process and report information
related to the financial aspects of
business events
• Often integrated and indistinguishable
from overall information system
• Like the IS, the AIS may be divided into
components based on the operational
functions supported.

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Comparison of Manual and
Automated Systems

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Components of Business Process

1. Management hires
personnel and
establishes the
means for
accomplishing
the work of the
organization.

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Components of Business Process
2. Management
establishes broad
marketing objectives
and assigns sales
quotas to measure
progress toward the
long-run objectives.
Management also
designs the IS
procedures for
facilitating
operations, such as
the procedures used
to pick and ship
goods to the
customer.

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Components of Business Process

3. The IS receives
the customer’s
purchase order.

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Components of Business Process

4. The IS
acknowledges the
customer’s purchase
order (send order
acknowledgement).

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Components of Business Process

5. The IS sends a
request to ship
goods to warehouse.
This request
identifies the goods
and their location in
the warehouse.

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Components of Business Process

6. A document (i.e., a
packing slip)
identifying the
customer and the
goods is attached to
the goods.

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Components of Business Process

7. Goods are
shipped to customer.

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Components of Business Process

8. The shipping
department reports
to the IS that the
goods have been
shipped.

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Components of Business Process

9. The IS prepares
an invoice and sends
it to the customer.

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Components of Business Process

10. The IS sends

management a
report comparing
actual sales to
previously
established sales
quotas.

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Information Qualities

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Information Qualities
Control Matrix

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Management Decision Making

1. Intelligence: Searching the environment

for conditions calling for a decision.
2. Design: Inventing, developing, and
analyzing possible courses of action.
3. Choice: Selecting a course of action.

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Management Decision Making

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 ws
flo
Strategic
Management

ion
at Tactical
rm
fo
Management
l in
ca

Operations
r ti

Management
Ve

Operations and
Transaction Processing

Horizontal information flows

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 Management Problem Structure
and Information Requirements
• Horizontal flows relate to specific business
events, such as one shipment, or to individual
inventory items.
– the information moves through operational units such
as sales, the warehouse, and accounting.
• Vertical Flows relate to the flow of information to
and from strategic management through tactical
management, operations management, and
operations and transaction processing

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 Management Problem Structure
and Information Requirements
Higher up the pyramid, the less structured the decision
• Less defined
• External orientation
• More summarized information
• Future oriented
• Less frequent
• Less accurate
Lower down the pyramid, the more structured the decision
• More defined
• Internal orientation
• More detailed information
• Historical
• More frequent
• More accurate

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 Accountant’s Role
• Designer—application of accounting
principles, auditing, information
systems, and systems development
• User—participate in design
• Auditor—provide audit and assurance
services

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