S T U D Y U NIT 2

Application and Types of Information

systems

1 Introduction
Information system is a system that handles the flow and maintenance of information which
supports the business operations. The components of IS are people, equipment,
procedures, and data. IS are used by organisation for different purposes.

2 Accounting Information System (AIS)

As already provided the role of accountants is to produce financial statements that is

reliable, timely, complete, and understandable with quality characteristics, (Vladimir: Z:
2020). According to Trinandha, A. , Ghozali, I. , Fuad (2018), in addition to providing a
positive impact on speed and accuracy of financial statement presentation, the use of AIS
also has the risks that can provide opportunity for the users to misuse the system. Cheating
through the information technology allows criminals to fastly gain more benefits (Romney,
1976; Lynch & Gomaa, 2008). Given the large impact on computer-based accounting fraud,
it is important to examine the factors of AIS’s usage on the attention of AIS’s misuse
(computer acounting fraud). The researches on the risks and threats of AIS have been
widely conducted and the result shows that both risks and threats can happen (Loch et.al,
1992; Davis et.al., 1996; Henry, 1997; Dhillon,1999; Musa, 2006; Hanini, 2012; Muhrtala &
Ogundeji, 2013; Aleksandrova, 2016). Likewise, the research on computer related-fraud
(Thompson,1998; Haugen & Selin,1999; Dhillon,1999; Seetharaman,2003; Lee & Lee,
2002) indicates the presence of unauthorized misuse or interference on computer usage
results in computer-related fraud. This will be dealt with later in the study guide, in topic 4.

3 Application of AIS

In a research conducted in Indonesia aimed to analyse the local government accounting

information system by Kurniati, P.S., Suryanto (2021), the application of accounting
information systems is able to produce useful local government financial statements for
users in assessing accountability and making decisions in both economic, social and
political decisions. However, in its implementation even though there is an accounting
information system, there is still overlap in the use of the accounting base. This research
adds to the accounting information system literature and is important in measuring the
application of government accounting standards. Generally, AIS has an impact and effect
in any areas of the business.
 There is a significant positive effect between AISs (relevance, reliability, timeliness,
understand ability, completeness, and verifiability) in enhancing the efficiency of internal
control and attention should be paid more when performing an interal control (Alrabei, A.M:
2021). In addition, there is a relationship at a significance of the effect of the elements of
AIS on the organisational culture. Also, that (1) the hardware and software used in the AIS
are the best and the latest currently available, and (2) the AIS provides financial information
with a high predictive power which assists the users of the system. Furthermore, the proper
understanding of organisational culture leads to the improvement of work quality. In this
regard, the organisational culture regulates and strengthens employees' efforts on the
company's target track. Therefore, in order to improve quality AIS, companies must employ
highly skilled and competent professionals and accountants which have appropriate
academic qualifications to generate financial information (Jarah, B.A.F., Almatarneh,
Z:2021).

4 Accounting information system implementation under Enterprise Resource

Planning (ERP) and successful decision-making
AIS implementation under Enterptise Resource Planning (ERP) and successful decision
making indicates that firstly AIS implementation under ERP has a positive effect on useful
information, and successful decision-making. Secondly accountant competency positively
affects useful information. Thirdly the model's influences of AIS implementation under ERP
and accountant competency on useful information, and successful decision-making (Lata,
P:2021)

5 Why study an accounting information system?

A career in accounting or auditing will challenge you to evaluate the reliability and accuracy
of the information from an accounting information system (AIS). In order to do so you will
need to understand the development, operation and control of the system and be able to
identify the strengths and weaknesses of the system.

6 COMPUTER INFORMATION SYSTEM (CIS)

People can use a computerised information system to gain access to meaningful

information. An example of a computerised information system is an ATM machine.

A computerised information system is a set of hardware, software, teIecommunication,

peopIe and procedures that is used to coIIect, store and process data into information.

A computerised information system consists of different components.

Components of a computerised information system

Hardware Software People Procedure Databases

s
 FIGUR 2.1:The components of a computerised information system

It is a system that is composed of people and computers that processes or interprets

information. The term is also sometimes used to simply refer to a computer system with
software installed.

As indicated by Abdulle, A.S , Zainol, Z. , Ahmad Mutalib, H. (2019), information,

communication and technology (ICT) adoption has increased dramatically over time
irrespective of organisations, be public or private, profit or not for profit organizations around
the world. No doubt that ICT investment will spur economic growth as studies done by many
countries. The African Union Agenda 2063 has acknowledged the importance of digital
inclusivity for African countries to be on par with the rest of the world as an information
society. African nation and Somalia in particular still have some challenges to deploy ICT
on the concern of availability, accessibility and affordability. Nevertheless, in a business
environment where businesses compete in the highly fragile market, ICT modernization in
all business processes including accounting is a crucial tool for continuous improvement
towards competitive services offered to customers. The implementation and adaption
computerised accounting systems (CAIS) for any organisation such as SMEs will enable
the management and owners to improve decision-making, internal controls and financial
information, as well as enable financial reporting to be designed and processed on a
standardized format and timely. It was reported that the use of inefficient information to
support financial decision making and poor quality and reliability of financial information
were part of the major SMEs challenges.

7 Types of IS and Functions

a. Transaction Processing System (TPS)
It serves the people in the operational level of an organsation. It collects and stores
information about transactions and controls some aspects of transactions. A sale of an
item in the store is an example of a transaction.
b. Knowledge Work System (KWS)
It is used by technical staff as model functions to convert design specifications into
graphical design. It uses Computer Aided Design/ Manufacture (CAD/CAM).
c. Office Automatic System (OAS)
It serves those that belong to the knowledge level of an organization. The system helps
individuals in the processing of personal and organizational data. Perform calculations
and create documents e.g. word processing, spreadsheets, file managers, personal
calendars, presentation packages.
d. Decision- Support System (DSS)
It helps the strategic management staff (senior officers) in making decisions. The
system uses information, models, or analysis tools in order for managers to make
simulations and prediction. Example of DSS is the 5 year investment plan.
e. Management Information System (MIS)
It serves the management level of the organisations. The system condenses and
converts the TPS data into information for purposes of monitoring performance and
 managing the organisations. Transactions that were recorded in the TPS are analysed
and reported by a MIS. Example of an MIS output is the budget report.
f. Executive Support System (ESS)
It serves the strategic level of an organization. A system provides top-level executive
of a readily accessible, interactive format to get the overview of the entire organisation’s
performance.

A c t i v i t y 2.1

Go to your e-tutor site and complete this activity.

Discuss the implications of outdated software of an AIS on the organisational culture.

Illustrate this with an applicable example.

Which of the components of the computerised information system will be severly

impacted by the evolving digital trends in the near future and why?
Go to the Discussion forum for study unit 2 and discuss this with your fellow students.

8 Summary
The information systems play a pivotal role in the success of the organisation, especially
relating to the correctness of its application. Particular attention should be applied to the
relationship between AISs and the internal control function within the organisation. The
implementation of an AIS also affects the information under an ERP environment in relation
to successful decision-making.
The components within a computerised information system are critical to its effective
functioning. In addition, there are various types of information systems, which need to be
acknowledged along with their specific functions. A thorough understanding of these
systems and functions will prove useful in the management of business information
systems.
The management of business information systems will be covered in study unit 3.