lecture 1 - arif sariarifsari.net/ais405course/lecture1.pdfintroduction to accounting information...
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A I S 4 0 5 : A c c o u n t i n g I n f o r m a t i o n S y s t e m s
Introduction to AccountingInformation Systems
Lecture 1
Introduction to AccountingInformation Systems
Appreciate the complex, dynamic environment inwhich accounting is practiced.Relationship between the Accounting Information
Systems and the organization’s business processes.Attributes of quality information.Components of an information systemHow information is used for different types of
decisions and at various levels in the organization.How the information system supports the
management function.Role of accountant in relation to the current
environment for the AIS.AIS 405 : Lecture 1 2
Tools of Trade
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Sarbanes-Oxley Act of 2002
Implications for both public and private accountants:
Section 404 (as modified by PCAOB AuditingStandard No. 5) –Management must identify, document, and
evaluate significant internal controls.Auditors must report on the effectiveness of the
organization’s system of internal controls.
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Sarbanes-Oxley Act of 2002 . . .
Implications for both public and private accountants:
Section 409 –Requires disclosure to the public on a
“rapid and current” basis of material changes in anorganization’s financial condition.
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CICA 2009 Top Ten IT Issues1. Maintaining adequate controls during the recession2. Maintaining security over moving data3. Lack of effective IT governance4. Coping with information overload5. Impact of IFRS on Information Systems6. Green computing7. Security requirements of the Payment Card Industry8. Malicious activity by laid-off employees9. Role of Web 2.0 applications in organizational
information systems10. Shortage of IT skills
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Business Environment
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IndustryThe Company
Competitors
Technologies
Customers
EconomicForces
PeopleCapital
Technology
Value Chain Products
Structure
Objectives
Strategies
Measurements
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Value Chain & Five Forces Model
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Porter’ s Value Chain
FIRM INFRASTRUCTURE
INBOUNDLOGISTICS
OPERATIONS OUTBOUNDLOGISTIC
MARKETING& SALESLOGISTIC
SERVICE
HUMAN RESOURCE MANAGEMENT
TECHNOLOGY DEVELOPMENT
PROCUREMENT
VALUE
COST MARGIN
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KNOWLEDGE
Database
PROCESS
Information ProcessingBusiness Rules, Procedures
INTERFACE
Input, OutputLocation, Security
BUSINESSCONTEXT
Hardware Software Networking
TECHNOLOGY DRIVERS
ERP, Object, Mobile,Collaborative, etc.
BUSINESS DRIVERSBPR, CRM,SCM, e-Biz, etc.
KNOWLEDGE
Database
PROCESS
Information ProcessingBusiness Rules, Procedures
INTERFACE
Input, OutputLocation, Security
BusinessData
BusinessUsers
Hardware Software Networking
BUSINESSCONTEXT
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Elements in the Study of IS / AIS
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Systems and Subsystems …
System: a set of interdependent elements thattogether accomplish specific objectives. A systemmust have organization, interrelationships,integration, and central objectives.Subsystem: a part of a system. Within limits, any
system or subsystem can be divided into itscomponent parts.
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Systems and Subsystems
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INPUT OUTPUT
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Systems and Subsystems . . .
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Systems and Subsystems . . .
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System Decomposition Diagram
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The Information System (IS)
An information system (IS) or managementinformation system (MIS) is a manmade system thatconsists of an integrated set of computer-basedand manual components established to collect,store, and manage data and to provide outputinformation to users. (Gelinas et al.)
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Information Technology Vs. Information System
Information Technology (IT): A combination ofcomputer technology (hardware and software)with telecommunications technology (data, image,and voice networks)
Information System (IS): People, data, processes,and information technology that interact to collectdata, store, process, and provide as output theinformation needed to support and improveoperational, tactical, and strategic activities of anorganization (business).
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Information Technology Vs. Information System
Combinations ofhardware, software,and telecomnetworks use toprocess data
Combinations ofhardware, software,and telecomnetworks that peoplebuild and use tocollect, create, anddistribute useful datain organizations (fordecision making)
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Functional Model of an Information System
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Accounting Information System (AIS)
Accounting information system (AIS) is a specializedsubsystem of the IS.Collect, process and report information related to
the financial aspects of business events.Often integrated and indistinguishable from the
overall information system.Like the IS, the AIS may be divided into components
based on the operational functions supported.Components are called business processes or AISsubsystems.
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Business Process in Enterprise Systems
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A business process is a set of related steps orprocedures designed to produce a specificoutcome.
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Business Process Components
Information process: portion of the overall IS relatedto a particular business process.Operations process: man-made system consisting of
the people, equipment, organization, policies, andprocedures whose objective is to accomplish thework of the organization.Management process: man-made system consisting
of the people, authority, organization, policies, andprocedures whose objective is to plan and controlthe operations of the organization.
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Business Process Activities (Events)
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Decision /management
events
Operatingevents
Informationevents
Define &Trigger
Trigger Trigger
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Transforming Data into Information …
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Basic System Model
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Example: Architecture of A Payroll System
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Information Qualities
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Key Information Qualities
Validity: information about actual authorized eventsand objects.Accuracy: correspondence or agreement between
the information and the actual events or objectsthat the information represents.Completeness: degree to which information
includes data about every relevant object or eventnecessary to make a decision and includes thatinformation only once.
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Management Decision Making
Intelligence: Searching the environment forconditions calling for a decision. Design: Inventing, developing, and analyzing
possible courses of action. Choice: Selecting a course of action.
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Decision Making Process
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Information Systems in Organization
STRATEGIC
OPERATIONAL
EXECUTIVE INFORMATION SYSTEMS
MANAGEMENT INFORMATION SYSTEMS
TRANSACTION PROCESSING SYSTEMS
ACCT
FINANCE
HR
PRODCTN
SALES
OTHERS
TACTICAL
VALUE CHAIN
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Business ProcessReengineering/Redesign
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IT/IS contributes to Business ProcessReengineering / Redesign (BPR) :Efficient: Do thing right (cheaper)Effective: Do right thing (better)Competitive: Do thing differently
(faster/newer)
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Decision-Making in an Organization
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Decision-Making Levelsin an Organization
Executive Level• Long-term decisions (Strategies)• Unstructured decisions (Competitions)Managerial Level
• Decisions covering weeks and months (Tactics)• Semi-structured decisions (Effectiveness)Operational Level
• Day-to-day / repetitive decisions (Operations)• Structured decisions (Efficiency)
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Management Problem Structureand Information Requirements
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Structure of Decisions
Structured decisions: those for which all threedecision phases (intelligence, design, and choice)are relatively routine or repetitive.Unstructured decisions: those for which none of the
decision phases (intelligence, design, or choice) areroutine or repetitive.Semi-structured decisionsRisk Factors in Judgments: No-risk, risky, high-risk
Decisions
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Horizontal vs. Vertical Information Flows
Horizontal information flows relate to specificbusiness events, such as one shipment, or toindividual inventory items. The information movesthrough operational units such as sales, thewarehouse, and accounting.
Vertical information flows service a multi-levelmanagement function from operations andtransaction processing through tactical, operations,and strategic management.
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Organizational Information Systems
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Operational Level
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Operational Level
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Day-to-day business processes Interactions with customers Information systems used to:
• Automate repetitive tasks• Improve efficiency Decisions:
• Structured• Recurring• Can often be automated using IS
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Architecture
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Data Processing• Online processing• Batch processingData Input
• Manual data entry• Semi-automated data entry (bar-code + manual)• Fully automated data entry (bar-code)
Transaction Processing Systems . . .
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Managerial Level
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Managerial Level
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Functional managers• Monitoring and controlling operational-level
activities• Providing information to executive level• Midlevel managers
- Focus on effectively utilizing and deploying resources- Goal of achieving strategic objectives
Managers’ decisions• Semi-structured• Contained within business function• Moderately complex• Time horizon of few days to few months
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Architecture
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Executive Level
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Executive Level
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The president, CEO, vice presidents, boardof directors Decisions
• Long-term strategic issues• Complex and non-routine problems• Unstructured decisions• Long-term ramifications
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Architecture
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Information SystemsSupporting the Functional Areas
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Information Systemsthat Span Organizational Boundaries
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Information System Stakeholders
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Information System Stakeholders
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Role of Accountantin Current Business Environment
Designer — application of accounting principles,auditing principles, IS techniques, and systemsdevelopment methods to design an AIS.User — participate in the AIS design process.Auditor — provide audit and assurance services.
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