Ch01 - Introduction To AIS V 5

Chapter 1
The
Information
System: An
Accountant’s
Perspective
James A. Hall, Accounting Information Systems, 10th Edition. © 2019

Cengage. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
Learning Objectives
 Recognize the primary information flows within the business

environment.
 Understand the difference between accounting information
systems and management information systems.
 Understand the difference between financial transactions and
nonfinancial transactions.
 Know the principal features of the general model for
information systems.
 Understand the organizational structure and functional areas
of a business.
 Be able to distinguish between external auditing, internal
auditing, and advisory services as they relate to accounting
2
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Information Environment
Learning Objectives

environment.
of a business.
4
A Framework for Information
Systems
Learning Objectives

environment.
of a business.
6
AIS versus MIS
 Accounting Information Systems (AIS) process
 financial transactions, e.g., sale of goods
 nonfinancial transactions that directly affect the processing of financial
transactions, e.g., addition of newly approved vendors
 Management Information Systems (MIS)

process
 nonfinancial transactions that are not normally processed by traditional AIS;
e.g., tracking customer complaints
7
Learning Objectives
environment.
of a business.
General Model for Accounting
Information Systems
Learning Objectives

environment.
of a business.
10
Responsibility, Authority and Accountability
Presiden
t
Vice Vice Vice Vice President

President President President Computer
Marketing Productio Finance Services
n
Manager Manager Manager Responsibility

Plant 1 Plant 2 Plant 3 and Authority
Manager Manager Manager Accountability

Unit 1 Unit 2 Unit 3
Functional Areas of a Firm
12
Learning Objectives

environment.
of a business.
13
Definition of System
 A group of interrelated multiple components or subsystems that serve a
common purpose
 System or subsystem?
 A system is called a subsystem when it is viewed as a component of a larger
system.
 A subsystem is considered a system when it is the focus of attention.
14
What is an Information System?
• The set of formal procedures by which data are

collected, processed into information, and
distributed to users.
• A combination of people, equipment, policies,

and procedures that work together to capture
data and transform it into useful information
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved. 15
What is an Accounting Information
System?
 AIS is an information system
 Identifies, collects, processes, and communicates

economic information about a firm using a wide
variety of technologies.
 Captures and records the financial effects of the
firm’s transactions.
 Distributes transaction information to operations
personnel to coordinate many key tasks.
16
AIS SUBSYSTEMS
 Transaction Processing System

 General Ledger/Financial Reporting Systems
 Nondiscretionary reporting is a type of reporting in which
the organization has few or no choices in the information
it provides. Much of this information consists of traditional
financial statements, tax returns, and other legal
documents.
 Management Reporting System
 Discretionary reporting is a type of reporting in which the
organization can choose what information to report and
how to present it.
17
Why
Why Accountants
Accountants Need
Need to
to
Understand
Understand Organizational
Organizational Structure
Structure
 Two reasons:
1. To assess the information needs of users
2. To design the AIS to meet those needs
FUNCTIONAL SEGMENTATION
 Segments are functional units of a business organization.

 Materials Management
 Purchasing
 Receiving
 Stores
 Production
• Production planning involves scheduling the flow of materials, labor,
and machinery to efficiently meet production needs.
• Quality control monitors the manufacturing process at various points
to ensure that the finished products meet the firm’s quality standards.
 Maintenance keeps the firm’s machinery and other manufacturing
facilities in running order.

19
FUNCTIONAL SEGMENTATION
(continued)
 Marketing
 Distribution
 Personnel
 Finance
20
THE ACCOUNTING FUNCTION
 Accounting manages the financial resource of the firm:
 Captures and records transactions.
 Distributes transaction information to operations personnel.
 The Value of Information

 Reliability is the property of information that makes it useful to users.
Unreliable information has no value.
 Accounting Independence
 Independence is the separation of the record-keeping function of accounting
from the functional areas that have custody of physical resources.
 Accounting supports these functions with information but does not participate
in the physical activities.
21
INFORMATION TECHNOLOGY
 Data Processing
 Centralized data processing is a model under which all data
processing is performed by one or more large computers,
housed at a central site, that serve users throughout the
organization.
 Distributed data processing (DDP) is reorganizing the IT
function into small information processing units (IPUs) that
are distributed to end users and placed under their control.
 Systems Development and Maintenance
 SYSTEMS DEVELOPMENT: Commercial software is pre-coded
software that a user purchases from a software vendor.
Commercial software packages are sometimes called turnkey
systems because they often can be implemented by the user
with little or no modification.
22
Centralized Data Processing
Model
23
Distributed Data Processing
Model
24
(continued)
 Systems Development and Maintenance (continued)

 SYSTEMS DEVELOPMENT (continued):
 Turnkey systems are completely finished and tested systems
that are ready for implementation.
 Custom software is software built to individual specifications.
Custom systems are more expensive than commercial packages.
 Systems development life cycle is the software development
process.
 Enterprise resource planning (ERP) is a system assembled of
prefabricated software components.
• SYSTEMS MAINTENANCE
 Database Administration
25
(continued)
 Network Administration
 A network is a collection of interconnected computers and
communications devices that allows users to communicate,
access data and applications, and share information and
resources.
 Network administration is being responsible for the
effective functioning of the software and hardware that
constitute the organization’s network. This involves
configuring, implementing, and maintaining network
equipment.
26
(continued)
 Outsourcing the IT Function

 IT outsourcing is contracting with a third-party vendor to take
over the costs, risks, and responsibilities associated with
maintaining an effective corporate IT function, including
management of IT assets and staff and delivery of IT services
such as data entry, data center operations, applications
development, applications maintenance, and network
management.
 Cloud computing is a location-independent computing variant of
IT outsourcing whereby shared data centers deliver hosted IT
services over the Internet.
 These services fall into three categories:
 software as a service (SaaS),
 infrastructure as a service (IaaS), and
 platform as a service (PaaS).
27
The Role of Accountants in
AIS
 Accountants are users of IS
 Accountants are involved in both the design and the
audit of AIS.
 Accountants play a prominent role on systems
development teams as domain experts.
 The IT professionals on the team are responsible for the
physical system.
28
ACCOUNTANTS AS SYSTEM USERS
 Accountants must be able to clearly convey their needs to the systems
professionals who design the system.
 The accountant should actively participate in systems development
projects to ensure appropriate systems design.
29
ACCOUNTANTS AS SYSTEM
DESIGNERS
 Conceptual system is the production of several
alternative designs for a new system.
 Physical system is the medium and method for
capturing and presenting the information.
 Data storage is an efficient information system that
captures and stores data only once and makes this
single source available to all users who need it.
30
AUDITORS
 Auditor is an expert who expresses an opinion about the
fairness of a company’s financial statements.
 Attest function is an independent auditor’s responsibility
to opine as to the fair presentation of a client firm’s
financial statement.
 Substantive tests are tests that determine whether
database contents fairly reflect the organization’s
transactions.
 Attest Service versus Advisory Services
 Tests of controls are tests that establish whether internal controls are
functioning properly.
 IT auditing is the review of the computer-based components of an
organization. The audit is often performed as part of a broader financial audit.
31
AUDITORS (continued)
 Internal Audits
 Internal auditing is the appraisal function housed within
the organization.
 External versus Internal Auditors
 Fraud Audits
 The Role of the Audit Committee
 Designer/Auditor Duality
32
QUIZ 1
Password: AIS2110
GOOD LUCK &

ALL THE BEST
33

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Chapter 1

James A. Hall, Accounting Information Systems, 10th Edition. © 2019

 Recognize the primary information flows within the business

 Recognize the primary information flows within the business

 Recognize the primary information flows within the business

 Management Information Systems (MIS)

 Recognize the primary information flows within the business

Vice Vice Vice Vice President

Manager Manager Manager Responsibility

Manager Manager Manager Accountability

 Recognize the primary information flows within the business

• The set of formal procedures by which data are

• A combination of people, equipment, policies,

 Identifies, collects, processes, and communicates

 Transaction Processing System

1. To assess the information needs of users

2. To design the AIS to meet those needs

 Segments are functional units of a business organization.

 The Value of Information

 Systems Development and Maintenance (continued)

 Outsourcing the IT Function

GOOD LUCK &

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