Accounting information systems controls and process 2nd tunnwe weickgenannt chapter 02

Chapter 2-4 SO 1 The interrelationships of business processes and the AIS Business Processes and the AIS Business Processes and the AIS Accounting Information System - a system that cap

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Prepared by Coby Harmon

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Chapter

2-2

Foundational Concepts of the AIS

Accounting Information Systems, 2 nd Edition

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1 The interrelationships of business processes and the AIS

2 Types of accounting information systems

3 Client-server computing

4 Cloud computing

5 Accounting software market segments

6 Input methods used in business processes

7 The processing of accounting data

8 Outputs from the AIS related to business processes

9 Documenting processes and systems

10 Ethical considerations at the foundation of accounting information

Study Objectives

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Chapter

2-4 SO 1 The interrelationships of business processes and the AIS

Business Processes and the AIS

Accounting Information System - a system that captures, records, processes, and reports accounting information.

Business Process - a prescribed sequence of work steps

completed in order to produce a desired result.

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Exhibit 2-1

Overall View of Transactions, Processes, and Resulting Reports

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Chapter

2-6

b Business processes may vary from company to company

1 Which of the following statements is not true?

c Regardless of the extent of computerization, all accounting

information systems must capture data from the transactions within business processes

d Business processes categorized as expenditure processes

are not intended to be processes that serve customers

SO 1 The interrelationships of business processes and the AIS

a Accounting information systems must maintain both detail

and summary information

Question

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Types of Accounting Information Systems

Three categories of AIS :

1 Manual systems

2 Legacy systems

3 Modern, integrated IT systems

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Chapter

2-8 SO 2 Types of accounting information systems

Manual Systems

Generally used by small organizations Entirely manual

system would require:

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Legacy Systems

Existing system, often based on old technology.

Advantages are that legacy systems:

1 Customized to specific needs

2 Support unique business processes not inherent in generic

accounting software

3 Contain invaluable historical data that may be difficult to

integrate into a new system

4 Well supported and understood by existing personnel

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Chapter

Disadvantages are that legacy systems:

1 Costly to maintain

2 Often lack adequate supporting documentation

3 Hardware needed to maintain may become obsolete

4 Not usually based on user-friendly interfaces

5 Tends to use software written in older computer languages

6 Often difficult to modify to make user friendly

7 Difficult to integrate when companies merge

Legacy Systems

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Decision whether to replace or update legacy systems.

1 Screen scrapers

2 Enterprise application integration

3 Complete replacement of legacy systems

Legacy Systems

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Chapter

Modern, Integrated Systems

New programs sold by software development companies are more user friendly than legacy accounting systems.

Advantages to purchasing accounting software:

1 Lower cost

2 Shorter implementation time

3 Fewer bugs

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Question

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Chapter

2-14

b They contain invaluable historical data that may be difficult

to integrate into newer systems

Which of the following is not a disadvantage of maintaining legacy

a There are fewer programmers available to support and

maintain legacy systems

SO 2 Types of accounting information systems

Question

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b It is less costly.

Which of the following is a disadvantage of purchased

accounting software, compared with software developed

in-house?

c The implementation time is shorter.

d There are fewer bugs.

a It is custom designed for that company.

Question

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Chapter

2-16

Two types of computers are networked together to

accomplish the application processing.

Characteristics:

1 Client and server computer are networked together

2 System appears to users to be one integrated whole

3 Individual parts of processing are shared between server

and client

4 Client computer participates in processing or data

manipulation in some meaningful way

SO 3 Client-server computing

Client–Server Computing

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Two Levels of Client-Server Computing:

1 Distributed presentation

2 Distributed applications

Client–Server Computing

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Chapter

2-18

Recently, there has been a movement away from a client-server

approach toward cloud computing It includes:

► Software and data reside with third party companies (the cloud)

and not on company computers

► Outsourcing of IT to a third party

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Chapter

2-20

The Real World

Thomas Kemper Soda Company of Portland, Oregon, is a small-batch craft-brewer

of root beer, ginger ale, and other natural soft drinks sold in the western United

States After years of struggling with communication and information sharing

between the members of its mobile workforce, the company recently began

subscribing to cloud based Microsoft Office 365 Significant improvements were

realized very quickly Rather than depending upon e-mail for sharing information

and documentation, management at Thomas Kemper began accessing its file-share server through the cloud They saved time; obtained better, more secure and up-to- date information; and were therefore able to work together more effectively Cloud-

based conferencing, e-mailing, calendaring, and screen-sharing all make it possible for the employees to stay connected despite their various physical locations In

addition, the company’s management team estimates that 40 hours of employee

productivity are gained each week due to communication efficiencies, six hours are saved each week on technology support, and thousands of dollars of expenses

have been avoided, including over $10,000 of hardware upgrade costs.

SO 4 Cloud computing

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Accounting Software Market

Segments and Movement in

the Market

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Chapter

2-22 SO 5 Accounting software market segments

Accounting Software Market Segments

Exhibit 2-3

Popular Accounting Software Programs within

the Market Segments

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a Enterprise application integration.

Question

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Chapter

2-24

b Midmarket.

When categorizing the accounting software market, a

company with revenue of $8 million would most likely

purchase software from which segment?

c Beginning ERP.

d Tier 1 ERP.

a Small company.

SO 5 Accounting software market segments

Question

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Input Methods Use In Business Processes

Input methods used in organizations:

► Point of Sale Systems

► Electronic Data Interchange (EDI)

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Chapter

2-26

b E-business.

An IT system that uses touch-screen cash registers as an

input method is called

c Point of sale system.

d Source documents and keying.

a Electronic data interchange.

SO 6 Input methods used in business processes

Question

Input Methods Use In Business Processes

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Processing Methods

Batch Processing - Transactions are grouped

Advantages

1 Efficient for large volumes of like transactions

2 Audit trail is maintained

3 Generally use less costly hardware and software

4 Hardware and software systems are not as complicated as

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Chapter

2-28 SO 7 The processing of accounting data

Processing Accounting Data

Batch Processing - Transactions are grouped

Disadvantages

1 Processing can take longer

2 Adding or deleting records takes much computer maintenance

time

3 Some data duplication is likely

4 Integration across business processes is difficult in legacy

systems that are batch oriented

5 Lag while all transactions in a batch are collected

6 May require that transaction and master files be sorted in the

same sequential order

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Online and Real-Time Processing

Advantages

1 System checks for input errors

2 Information provided on a timely basis

3 All files are constantly up to date

4 The business processes are integrated into a single database

so that a single system is achieved

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Chapter

2-30 SO 7 The processing of accounting data

Online and Real-Time Processing

Disadvantages

1 Hardware and software are more expensive than a batch

systems

2 A single database that is shared is more susceptible to

unauthorized access of data

3 Real-time systems can be difficult to audit

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b Real-time processing.

When similar transactions are grouped together for a

specified time for processing, it is called

c Batch processing.

d Group processing.

a Online processing.

Question

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Chapter

2-32 SO 8 Outputs from the AIS related to business processes

Outputs of the AIS

General Categories of Outputs

1 Trading partner documents such as checks, invoices,

and statements

2 Internal documents

3 Internal reports

4 External reports

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Documenting Processes and Systems

Pictorial Representations of processes and systems

include:

2 System flowcharts

4 Data flow diagrams

5 Entity relationship diagrams (ER diagrams)

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Chapter

2-34

Process Maps

SO 9 Documenting processes and systems

Pictorial representations of business processes in which the

actual flow and sequence of events in the process are

presented in diagram form.

Exhibit 2-6

Process Map Symbols

Start or Finish Activity Task or

Decision

Direction

of Flow

Connector

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Documenting Systems

Restaurant Process Map

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Exhibit 2-11

Restaurant Document Flowchart

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Chapter

2-40

Restaurant Data Flow Diagram

Used to show the logical

design of a system.

Data Flow Diagrams

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Entity Relationship Diagrams

Pictorial representations of the logical structure of

databases.

employees, customers, vendors, and inventory items

► Each entity has attributes, such as last name, first

name, pay rate, and number of withholdings

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Chapter

2-42

Cardinality refers to how many instances of an entity

relate to each instance of another entity.

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Entity Relationship

Diagrams

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Chapter

2-44

b Process map.

In documenting systems, which pictorial method is described

as a method that diagrams the actual flow and sequence of

events?

c Data flow diagram.

d Entity relationship diagram.

a System flowchart.

Question

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► Accountants should be aware of opportunities for

unethical behaviors within the various business processes

► As a company chooses features and options for its

accounting information systems, the importance of monitoring those systems should not be overlooked as a factor in decision making.

Ethical Considerations of AIS

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Chapter

2-46

APPENDIX: Resources Events Agents

Exhibit 2-16

An REA Pattern for Sales

The REA model

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