Chapter

1-1
 Chapter 1:
Accounting Information Systems
and the Accountant

Introduction
What Are Accounting Information Systems
(AIS)?
What’s New in AIS?
Accounting and IT
Careers in AIS

Chapter
1-2
 Introduction

Applying information technology (IT) to accounting

systems
 Financial accounting
 Managerial accounting
 Auditing
 Taxation

Increased career opportunities

 Specialized employment
 Combine accounting and advanced computer skills

Chapter
1-3
Accounting Information Systems

An Accounting Information System (AIS)

 Data and processing procedures
 Creates needed information for users

AIS Today
 Financial and non-financial data
 Enterprise-wide information system
 Business process focused

Chapter
1-4
 The Accountant’s Challenge

Provide information to support decision-making

Business and Government processes

Accounting and Finance

Non-Accountants

Chapter
1-5
 Information (versus Data)

Data
 Raw facts
 No organization or meaning
 Beginning of audit trail

Information
 Processed data
 Meaningful to users
Chapter
1-6
AIS Components

Chapter
1-7
 Computerized Data
Processing Problems

Information overload for users

Unable to identify input errors

Difficult to follow audit trails

Chapter
1-8
 AIS and ERP

Accounting Information Systems

 Internal and External users
 Financial information

Enterprise Resource Planning Systems

 Internal users
 Financial and Nonfinancial information
 Predictive analytics
Chapter
1-9
 AIS and ERP

Overlapping of the Systems

 Provide same information

 Emphasize business processes

 Integration into seamless databases

Chapter
1-10
 Study Break #1

Which of the following is likely to be information rather than

data?

A. Sales price
B. Customer number
C. Net profit
D. Employee name

Chapter
1-11
 Study Break #1 - Answer

Which of the following is likely to be information rather than

data?

A. Sales price
B. Customer number
C. Net profit
D. Employee name

Chapter
1-12
 Study Break #2

With respect to computerized AIS, computers:

A. Turn data into information in all cases

B. Make audit trails easier to follow
C. Cannot catch mistakes as well as humans
D. Do not generally process information more quickly than
humans

Chapter
1-13
 Study Break #2 - Answer

With respect to computerized AIS, computers:

A. Turn data into information in all cases

B. Make audit trails easier to follow
C. Cannot catch mistakes as well as humans
D. Do not generally process information more quickly than
humans

Chapter
1-14
 AIS: Role in Organizations

Information Age
 Impact of technology
 Fewer workers producing goods

Knowledge workers
 Produce, analyze, manipulate, and distribute information
 Focus on business activities

Chapter
1-15
 AIS: Role in Organizations

E-Business
 Conducting business over the Internet
 Increased importance and growth

E-Commerce
 Subset of e-business
 Buying and selling transactions

Chapter
1-16
 What’s New in AIS?

Cloud Computing

Sustainability Reporting

Suspicious Activity Reporting

Forensic Accounting, Governmental

Accountants, and Terrorism

Corporate Scandals and Accounting Chapter

1-17
Cloud Computing

Chapter
1-18
 Disadvantages of Cloud
Computing

Reliability of Internet Connection

Data Security Measures of Provider

Quality of Service

Reliability of Service Provider

Chapter
1-19
 Sustainability Reporting

Reporting Nonfinancial Measures

 Impacts on income, value, or future performance

Chapter
1-20
Suspicious Activity Reporting

Chapter
1-21
 Forensic Accounting

Forensic Accounting
 Combines skills of investigation, accounting, and auditing
 Provides evidence of criminal activity

Examples of AIS Uses in Forensic Accounting

 Identifying and denying financial aid to terrorists
 Tracing arms and chemical orders to final destination
 Planning for catastrophic events
 Controlling cyber terrorism
 Detecting money laundering and illegal transfers
Chapter
1-22
 Corporate Scandals and
Accounting

Enron (2001)
 Manipulation of accounting records
 Understate liabilities and inflate earnings

Bernard Madoff (2008)

 Investment fund manager
 Ponzi scheme
 Resulted in billions of dollars in losses
Chapter
1-23
 Study Break #3

The Sarbanes-Oxley Act of 2002:

A. Enables U.S. officers to wire tap corporate phones if

required
B. Has led to a decrease in the amount of work done by
auditors and accountants
C. Forbids corporations from making personal loans to
executives
D. Requires the CEO of a public company to take
responsibility for the reliability of its financial statementsChapter
1-24
 Study Break #3 - Answer

The Sarbanes-Oxley Act of 2002:

A. Enables U.S. officers to wire tap corporate phones if

required
B. Has lead to a decrease in the amount of work done by
auditors and accountants
C. Forbids corporations from making personal loans to
executives
D. Requires the CEO of a public company to take
responsibility for the reliability of its financial statementsChapter
1-25
 Study Break #4

The acronym SAR stands for:

A. Simple accounting receipts

B. Suspicious accounting revenue
C. Suspicious activity reporting
D. Standard accounts receivable

Chapter
1-26
 Study Break #4 - Answer

The acronym SAR stands for:

A. Simple accounting receipts

B. Suspicious accounting revenue
C. Suspicious activity reporting
D. Standard accounts receivable

Chapter
1-27
Accounting and IT

Chapter
1-28
 Objectives of Financial
Accounting

External
 Provide relevant information
 Investors, Creditors
 Financial Statements

Internal
 Provide relevant information
 Planning, decision making, and control activities
 Division managers, product managers
Chapter
1-29
The Accounting Cycle

Chapter
1-30
 Financial Accounting

Non-Financial Data
 REA Accounting
 Resources, Events, and Agents

Real-Time Reporting

Interactive Data and XBRL

 Reusable data in multiple applications
 “Tagging” data
Chapter
1-31
 Managerial Accounting

Objective
 Provide relevant information
 Internal users (Managers)

Components
 Cost Accounting
 Budgeting

Chapter
1-32
 Cost Accounting

Measure and Control Costs

 Acquisition, processing, distribution, and selling
activities

AIS Examples
 Activity-Based Costing
 Corporate Performance Measurement and Business
Intelligence

Chapter
1-33
 Activity-Based Costing

Assigning of Overhead
 Increased automation created difficulties
 Lacked direct relationship between labor and
overhead

AIS Implementation
 Easier assignment of overhead
 Important aspect of strategic planning

Chapter
1-34
 Corporate Performance
Measurement

Responsibility Accounting System

 Trace unfavorable performance to responsible
department or individuals
 Immediate corrective action by managers

Balanced Scorecard
 Financial Performance
 Customer Knowledge
 Internal Business Processes
 Learning and Growth Chapter
1-35
Business Intelligence and
Dashboards

Chapter
1-36
 Budgeting

Definition
 Financial projection for the future
 Short-range and long-range

Usefulness
 Managerial control
 Compare actual and budgeted results

Chapter
1-37
 Study Break #5

A dashboard is:

A. A computer screen used by data entry clerks for input

tasks
B. A physical device dedicated to AIS processing tasks
C. A summary screen typically used by managers
D. A type of blackboard used by managers to present useful
information to others

Chapter
1-38
 Study Break #5 - Answer

A dashboard is:

A. A computer screen used by data entry clerks for input

tasks
B. A physical device dedicated to AIS processing tasks
C. A summary screen typically used by managers
D. A type of blackboard used by managers to present useful
information to others

Chapter
1-39
 Study Break #6

Assigning overhead costs based on the resources, rather

than only direct labor, used in manufacturing is an example
of:

A. Activity-based costing (ABC)

B. Budgeting
C. Cost-plus accounting
D. Financial, rather than managerial, accounting

Chapter
1-40
 Study Break #6 - Answer

Assigning overhead costs based on the resources, rather

than only direct labor, used in manufacturing is an example
of:

A. Activity-based costing (ABC)

B. Budgeting
C. Cost-plus accounting
D. Financial, rather than managerial, accounting

Chapter
1-41
 Auditing

Traditional role
 Evaluate the accuracy and completeness of a
corporation’s financial statements
Present role
 Evaluate client’s compliance with HIPAA laws
 IT evaluations and audits (security, privacy)
 Management consulting

Chapter
1-42
 Taxation

Taxation Software
 Example of AIS
 Create and evaluate tax strategies
 Transmit completed forms

Professional Usage
 Research challenging questions
 Access more up-to-date information
 Database access
Chapter
1-43
 Careers in Accounting
Information Systems

Traditional Accounting
 Understanding of accounting and information systems
 Certified Information Technology Professional

Systems Consulting
 Designing systems and reengineering processes
 Software and hardware selection
 Value-added resellers (VARs)

Chapter
1-44
 Careers in Accounting
Information Systems

Certified Fraud Examiner

 Professional certification
 Association of Certified Fraud Examiners (ACFE)

IT Auditing and Security

 Risk analysis with Information Systems
 Aid financial auditors in evaluation of controls
 Certified Information Systems Auditors (CISAs)
 Penetration testing
Chapter
1-45
 AIS at Work: Consulting
Work for CPAs

Disaster Recovery Planning

 Assures continuity of operations
 Must test plan regularly
IT Exposure
 Viruses and Worms
Auditing Standard No. 60
 Report lack of disaster plan

Chapter
1-46
 Copyright

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use of the information contained herein.

Chapter
1-47
Chapter 1

Chapter
1-48