CHAPTER 1: OVERVIEW OF AIS for faithful representation of the

relevant phenomena.”
What Is a System? 4. Timely
 System  “Having information available to a
- A set of two or more interrelated components interacting decision maker before it loses its
to achieve a goal capacity to influence decisions.”
 Goal Conflict 5. Understandable
- Occurs when components act in their own interest without
regard for overall goal  “The quality of information that
 Goal Congruence enables users to perceive its
- Occurs when components acting in their own interest significance.”
contribute toward overall goal
6. Verifiable
Process 1 + Process 2= GOAL
 “The ability through consensus among
Data vs. Information measurers to ensure that information
represents what it purports to
 Data are facts that are recorded and stored. represent or that the chosen method
- Insufficient for decision making. of measurement has been used
 Information is processed data used in decision making. without error or bias.”
- Too much information however, will make it more, not
less, difficult to make decisions. This is known as 7. Accessible
Information Overload.
 Available when needed (see Timely)
Value of Information and in a useful format (see
Understandable).
Benefits
Business Process
 Reduce Uncertainty
 Improve Decisions  Systems working toward organizational goals
 Improve Planning
 Improve Scheduling

Costs

 Time & Resources Financing Revenue

- Produce Information
- Distribute Information

*Benefit $’s > Cost $’s

What Makes Information Useful?

 Necessary characteristics: Human

1. Relevant Expenditure
Resources
 “The capacity of information to make a
difference in a decision by helping
users to form predictions about the
outcomes of past, present, and future
events or to confirm or correct prior Production
expectations.”

2. Reliable

 “The quality of information that

 Revenue
assures that information is reasonably
free from error and bias and faithfully  Expenditure
represents what it purports to
represent.”  Production

3. Complete  Human Resources

 “The inclusion in reported information  Financing

of everything material that is necessary
 Give–Get exchanges
 Between two entities

 Measured in economic terms Improve Decision Making

Business Cycle Give–Get  Identify situations that require action.

 Provide alternative choices.
 Reduce uncertainty.
 Provide feedback on previous decisions.
 Provide accurate and timely information.

Value Chain

 The set of activities a product or service moves along

before as output it is sold to a customer
o At each activity the product or service gains
value

Value Chain—Primary Activities

Marketin
Inbound Operation Outbound g/ Service
Logistics s Logistics
Sales

Value Chain—Support Activities

Accounting Information Systems

Firm
 Collect, process, store, and report data and information Infrastructure Technology
 If Accounting = language of business
 AIS = information providing vehicle
 Accounting = AIS
Human Purchasing
Components of an AIS Resources

 People using the system

 Procedures and Instructions
- For collecting, processing, and storing data Value Chain
 Data
 Software
 Information Technology (IT) Infrastructure
- Computers, peripherals, networks, and so on
 Internal Control and Security
- Safeguard the system and its data

AIS and Business Functions

 Collect and store data about organizational:

- Activities, resources, and personnel
 Transform data into information enabling
- Management to:
o Plan, execute, control, and evaluate
 Activities, resources, and personnel
 Provide adequate control to safeguard AIS and Corporate Strategy
- Assets and data
Organizations have limited resources, thus investments to AIS should
AIS Value Add have greatest impact on ROI.

 Improve Quality and Reduce Costs Organizations need to understand:

 Improve Efficiency
 IT developments
 Improve Sharing Knowledge
 Improve Supply Chain  Business strategy
 Improve Internal Control
 Improve Decision Making  Organizational culture
Will effect and be effected by new AIS  Provide instructions and prompts
 Check boxes
 Drop-down boxes
CHAPTER 2: Overview of Transaction Processing and ERP Systems o Complete
 Internal control support
Data Processing Cycle  Prenumbered documents

Data Storage

 Types of AIS storage:

o Paper-based
 Ledgers
 Journals
Input Process Output
o Computer-based

Ledgers

 General
o Summary level data for each:
 Asset, liability, equity, revenue, and
Storage
expense
 Subsidiary
The Data Processing Cycle Determines o Detailed data for a General Ledger (Control)
Account that has individual sub-accounts
 What data is stored?  Accounts Receivable
 Accounts Payable
 Who has access to the data?
Journals
 How is the data organized?
 General
 How can unanticipated information needs be met? o Infrequent or specialized transactions
Data Input—Capture  Specialized
o Repetitive transactions
 As a business activity occurs data is collected about:  E.g., sales transactions

1. Each activity of interest Coding Techniques

2. The resources affected  Sequence

o Items numbered consecutively
3. The people who are participating
 Block
Paper-Based Source Documents o Specific range of numbers are associated with a
category
 Data are collected on source documents  10000–199999 = Electric
o E.g., a sales-order form Range
o The data from paper-based will eventually need  Group
to be transferred to the AIS o Positioning of digits in code provide meaning
 Turnaround  Mnemonic
o Usually paper-based o Letters and numbers
o Are sent from organization to customer o Easy to memorize
o Same document is returned by customer to o Code derived from description of item
organization  Chart of accounts
o Type of block coding
Source Data Automaton
Computer Based Storage
 Source data is captured
o In machine-readable form  Entity
o At the time of the business activity o Person, place, or thing (Noun)
 E.g., ATM’s; POS o Something an organization wishes to store data
about
Data Input—Accuracy and Control
o Attributes
 Well-designed source documents can ensure that data  Facts about the entity
captured is o Fields
o Accurate  Where attributes are stored
o Records Data Output Types
 Group of related attributes about an
entity  Soft copy
o File o Displayed on a screen
 Group of related Records  Hard copy
o Printed on paper

ERP Systems

File Types

 Transaction

o Contains records of a business from a specific

period of time

 Master

o Permanent records

o Updated by transaction with the transaction file

 Database
Enterprise Resource Planning (ERP)
o Set of interrelated files
 Integrate an organization’s information into one overall
AIS
 ERP modules:
o Financial
Transaction
File o Human resources and payroll
o Order to cash
Updated o Purchase to pay
Master o Manufacturing
o Project management
File o Customer relationship management
Master
before
o System tools
Update
ERP Advantages

 Integration of an organization’s data and financial

information
Data Processing  Data is captured once
 Greater management visibility, increased monitoring
 Four Main Activities  Better access controls
 Standardizes business operating procedures
1. Create new records
 Improved customer service
2. Read existing records  More efficient manufacturing

3. Update existing records ERP Disadvantages

4. Delete records or data from records  Cost

 Time-consuming to implement  Label should describe the information moving
 Changes to an organization’s existing business
processes can be disruptive Process
 Complex  Represents the transformation of data
 Resistance to change

CHAPTER 3: Systems Documentation Techniques

Systems Documentation Techniques

Data Store
 Set of documents and models
o Narratives, data flow models, flowcharts  Represents data at rest
 Describe who, what, why, when, and where of systems:
o Input, process, storage, output, and controls Data Flow Diagram Levels

 Context
Why Should You Learn Documentation?
o Highest level (most general)
 You need to be able to read documentation in all its forms: o Purpose: show inputs and outputs into
narratives, diagrams, models. system
 You need to be able to evaluate the quality of systems, o Characteristics: one process symbol only, no
such as internal control based in part on documentation. data stores
 SAS 94 requires independent auditors to understand all  Level-0
internal control procedures. o Purpose: show all major activity steps of a
o Documentation assists in auditor understanding system
and documentation of their understanding o Characteristics: processes are labeled 1.0,
 Sarbanes-Oxley states that management: 2.0, and so on
o Is responsible for internal control system
o Is responsible for assessing the effectiveness of DFD Creation Guidelines
the IC System  Understand the system
o Both management and external auditors need to  Ignore certain aspects of the system
document and test IC System  Determine system boundaries
Data Flow Diagrams  Develop a context DFD
 Identify data flows
 Graphically describes the flow of data within a system  Group data flows
 Four basic elements  Number each process
 Identify transformational processes
 Group transformational processes
 Identify all data stores
 Identify all sources and destinations
 Label all DFD elements
 Subdivide DFD
Entity Data Flow
Process Flowcharts

 Use symbols to logically depict transaction processing and

the flow of data through a system.
Data Store  Using a pictorial representation is easier to understand
and explain versus a detailed narrative.

Flowchart Symbol Categories

Entity
 Input/Output
 Represents a source of data or input into the system or  Processing
 Storage
 Represents a destination of data or output from the  Miscellaneous
system  (cont’d)

Data Flows

 Movement of data among:

o Entities (sources or destinations)
o Processes
o Data stores
Types of Flowcharts System Flowchart

 Document
o Illustrates the flow of documents through an
organization
o Useful for analyzing internal control procedures
 System
o Logical representation of system inputs,
processes, and outputs
o Useful in systems analysis and design
 Program
o Represent the logical sequence of program logic

Document Flowchart

Document Flowchart (cont’d)

Program Flowchart