14.08.

2024

CHAPTER 1
Introduction to Accounting Information Systems
John Timmy Merjudio, CPA, MBA, CLSSBB
Department of Accountancy
San Pedro College of Business Administration

CHAPTER OUTLINE

• Overview of Accounting Information System (AIS)

• Role and importance of AIS in Business
• Components and functions of AIS
• Types of information system
• Fundamentals of Computerized Information System
• Role of Accountant in AIS
• Types of Audit in AIS

ASSESSMENT
• Quiz
• Group discussion
• Reflection Paper (Accounting Information System in Modern World)

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OVERVIEW OF ACCOUNTING INFORMATION SYSTEM

What is accounting?

• Accounting is a vital process that involves the systematic recording, summarizing, analyzing, and reporting of financial
transactions to provide insights into a business's financial health and performance. It encompasses activities such as
bookkeeping, financial statement preparation, and overall financial management.

• It has been called as the language of business

What is information?

• Information is a business resource and vital to the survival of the business organization. Its flow could be external or
internal

Introduction to Accounting Information Systems

OVERVIEW OF ACCOUNTING INFORMATION SYSTEM

What is system?

• A system is a group of two or more interrelated components or subsystems that serve a common purpose

• Elements of systems are multiple components, relatedness, system vs subsystem and purpose

What is information system?

• set of formal procedures by which data are collected, processed into information, and distributed to the users

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OVERVIEW OF ACCOUNTING INFORMATION SYSTEM

What is accounting information system (AIS)?

• subsystem that process financial and nonfinancial transactions that directly affect the processing of financial transactions

• system of collecting and processing transaction data and communicating financial information to decision-makers

FRAMEWORK FOR INFORMATION SYSTEM

Introduction to Accounting Information Systems

OVERVIEW OF ACCOUNTING INFORMATION SYSTEM

• AIS subsystem are composed of transaction processing system, general ledger/financial reporting system and management
reporting system

• Transaction Processing System

• Support daily business operations with numerous reports,
TPS documents, and messages for users throughout the organization

• General Ledger/Financial Reporting System

AIS Subsystem • Produce traditional financial statements, such as the income
statement, balance sheet, statement of cash flows, tax returns and
GL/FRS others required by law

• Management Reporting System

• Provides internal management with special-purpose financial reports
and information needed for decision making such as budget,
MRS variance reports and subsystem

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ROLE & IMPORTANCE OF AIS IN BUSINESS

Importance of Accounting Information System in Business

• Improving the quality and reducing the costs of products and services
• Improving efficiency
• Sharing knowledge
• Improving the efficiency and effectiveness of its supply chain
• Improving the internal control structure
• Improving decision making

Introduction to Accounting Information Systems

KEY COMPONENTS AND FUNCTION OF AIS

General Model of AIS

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COMPONENTS AND FUNCTION OF AIS

Six components of AIS Functions

People
Collect and store data
Procedures and Instructions

Data
Transform data into
Software Used
information

IT infrastructure
Provide adequate
control
Internal controls and security measures

Introduction to Accounting Information Systems

TYPES OF INFORMATION SYSTEM

Accounting Information • Composed of transaction processing systems, GL/ Financial reporting system and management reporting systems.
System (AIS) Computerized system that processes, records, and provide reports of consolidated transaction in real time

• Comprehensive framework that leverages technology to gather, process, store, and disseminate information to
Management Information support managerial functions within an organization. It serves as the backbone of modern management, ensuring
System (MIS) that decision-makers are equipped with accurate, timely, and relevant data to steer their organizations toward
success.

• Sophisticated computer-based applications designed to assist decision-makers in solving complex problems and
Decision Support System making strategic choices. By harnessing advanced analytics, data modelling, and artificial intelligence, DSS provide
(DSS) invaluable insights, enabling managers to navigate uncertainties, explore alternatives, and make well-informed
decisions.

Executive Support System • Designed to assist senior management in strategic decision-making processes. Tailored to the needs of high-level
executives, it provides comprehensive information from internal and external sources, enabling leaders to analyze
(ESS) trends, assess organizational performance, and formulate long-term strategies.

Office Automation System • Essential tools for businesses aiming to enhance productivity, streamline workflows, and foster collaborative work
environments. It refers to the integration of computer hardware, software, and network connections to optimize
(OAS) routine office tasks and facilitate efficient information management.

• Encompasses a set of technologies, applications, and processes that analyze and transform raw data into insights
Business Intelligence which are meaningful. This helps businesses to gain a comprehensive understanding of their operations, customers,
and market dynamics. By employing advanced analytics and data visualization techniques, BIS empowers
System (BIS) organizations to make informed decisions, identify patterns, and forecast trends, thereby gaining a competitive edge
in the fast-paced business landscape.

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FUNDAMENTALS OF COMPUTERIZED INFORMATION SYSTEM

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ROLE OF ACCOUNTANT IN AIS

Three ways involvement of accountant

USERS SYSTEM DESIGNERS SYSTEM AUDITORS

Accounting function is the single Accountants are responsible for key Reliability of internally produced
largest user of IT and all system that aspects of information system, financial statement must be proved
process financial transaction impact including assessment of information by auditing the company’s system as
accounting functions. As end users needs, defining the content and form part of substantive testing and
accountant needs to provide clear format of output reports, specifying test of control. Reports are to be
picture of their needs to system sources of data, what are the validated by independent expert
designer. accounting rules and controls needed auditor.
for better system integrity and
efficiency

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TYPES OF AUDIT IN AIS

External Auditing IT Auditing Internal Auditing

• System auditors responsibility • Usually performed as a broader • Conducting FS audits, examining
was limited to attestation part of financial audit and attest operational compliance with
function and expand its scope the effectiveness of client’s IT orgt’l policies, reviewing the
and role into a broader concern controls to establish the degree organization’s compliance with
of assurance of compliance with prescribed legal obligations, evaluating
standards. operational efficiency, detecting
and pursuing fraud within the
firm, and conducting IT audits

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