ACCOUNTING AND

INFORMATION SYSTEM

BSA 2A
Accounting Information Systems, 7e
James A. Hall

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1
 Chapter 1
THE INFORMATION SYSTEM: AN
ACCOUNTANT’S PERSPECTIVE

Accounting Information Systems, 7e

James A. Hall

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2
 Objectives for Chapter 1
 Understand the primary information flows within the business
environment.
 Understand the difference between accounting information
systems and management information systems.
 Understand the difference between a financial transaction and
a nonfinancial transaction.
 Know the principal features of the general model for
information systems.
 Be familiar with the functional areas of a business and their
principal activities.
 Understand the stages in the evolution of information systems.
 Understand the relationship between external auditing, internal
auditing, and information technology auditing.

Hall, Accounting Information Systems, 7e 3

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Why Study AIS?

 In Statement of Financial Accounting

Concepts:
defined accounting as an information
system.
stated that the primary objective of
accounting is to provide information useful
to decision makers.

Hall, Accounting Information Systems, 7e ©2003 Prentice Hall Business Publishing, 1-4
Accounting
©2011 Cengage Learning. All Rights Reserved. May not be scanned, Information
copied Systems,
or duplicated, 9/e,
or posted to a publicly accessible website, in whole or in part.
Romney/Steinbart
 Why Study AIS?

 To understand how the accounting

system works.
 How to collect data about an organization’s
activities and transactions
 How to transform that data into information
that management can use to run the
organization
 How to ensure the availability, reliability, and
accuracy of that information

Hall, Accounting Information Systems, 7e ©2003 Prentice Hall Business Publishing, 1-5
Accounting
©2011 Cengage Learning. All Rights Reserved. May not be scanned, Information
copied Systems,
or duplicated, 9/e,
or posted to a publicly accessible website, in whole or in part.
Romney/Steinbart
 Why Study AIS?

 Auditors need to understand the systems

that are used to produce a company’s
financial statements.
 Tax professionals need to understand
enough about the client’s AIS to be
confident that the information used for
tax planning and compliance work is
complete and accurate.

Hall, Accounting Information Systems, 7e ©2003 Prentice Hall Business Publishing, 1-6
Accounting
©2011 Cengage Learning. All Rights Reserved. May not be scanned, Information
copied Systems,
or duplicated, 9/e,
or posted to a publicly accessible website, in whole or in part.
Romney/Steinbart
 Why Study AIS?
 One of the fastest growing types of
consulting services entails the design,
selection, and implementation of new
Accounting Information Systems.
 A survey conducted by the Institute of
Management Accountants (IMA)
indicates that work relating to accounting
systems was the single most important
activity performed by corporate
accountants.

Hall, Accounting Information Systems, 7e ©2003 Prentice Hall Business Publishing, 1-7
Accounting
©2011 Cengage Learning. All Rights Reserved. May not be scanned, Information
copied Systems,
or duplicated, 9/e,
or posted to a publicly accessible website, in whole or in part.
Romney/Steinbart
 What Is Accounting?

 It is the principal way of

organizing and reporting
financial information.
 It has been called the
“language of business.”

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 What Is Accounting?

 Accounting and information

systems comprise the functional
area of business responsible for
providing information to the other
areas to enable them to do their jobs
and for reporting the results to
interested parties.

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 What Is Accounting?
 An accounting information system
(AIS) is a system that a business uses
to collect, store, manage, process,
retrieve, and report its financial data.
 This data can then be used by
accountants, consultants, business
analysts, managers, chief financial
officers (CFOs), auditors, regulators,
and tax agencies.
Hall, Accounting Information Systems, 7e
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 What Is Accounting?

 To that end, an accounting

system is used to identify,
analyze, measure, record,
summarize, and communicate
relevant economic information to
interested parties.

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 What Is a System?

 A System is an entity consisting

of interacting parts that are
coordinated to achieve one or
more common objectives.

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 SYSTEMS, DATA, AND
INFORMATION

 A system is:
 A set of interrelated components
 That interact
 To achieve a goal

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 SYSTEMS, DATA, AND
INFORMATION
 Every organization has goals.
 The subsystems should be designed to maximize
achievement of the organization’s goals.
 Even to the detriment of the subsystem itself.
 EXAMPLE: The production department (a
subsystem) of a company might have to forego its
goal of staying within its budget in order to meet
the organization’s goal of delivering product on
time.

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 What Is a System?

 A group of two or more interrelated multiple

components or subsystems that serve a common
purpose
 System or subsystem?
 A system is called a subsystem when it is viewed as a
component of a larger system.
 A subsystem is considered a system when it is the
focus of attention.

Hall, Accounting Information Systems, 7e

James A. Hall
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Multiple Components means:

 A system must contain more than one

part .
 for example a yo-yo carved from a
single piece of wood and attached
stringis a system. without a string , it is
not a system.

Hall, Accounting Information Systems, 7e

James A. Hall
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Relatedness
 a common purpose relates to multiple parts
of the system. although each part fuions
independently of each others, all parts
serve a common onjective.
 if a particular component does not
contribute to a common goal, then it is not
part of the system.

Hall, Accounting Information Systems, 7e

James A. Hall
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Purpose means:
 a system must serve at least ine purpose,
but it may serve several.
 Whether a system provides a measure of
time, electrical power, or information
serving a purpose is its fundamental
justification.

Hall, Accounting Information Systems, 7e

James A. Hall
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Significance of AIS
 An accounting information system (AIS) is used
by companies to collect, store, manage, process,
retrieve, and report financial data.
 AIS can be used by accountants, consultants,
business analysts, managers, chief financial
officers, auditors, and regulators.
 An AIS helps the different departments within a
company work together.

Hall, Accounting Information Systems, 7e

James A. Hall
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Significance of AIS
 An AIS helps the different departments
within a company work together.
 An effective AIS uses hardware and
software to effectively store and retrieve
data.
 The internal and external controls of an AIS
are critical to protecting a company's
sensitive data.
Hall, Accounting Information Systems, 7e
James A. Hall
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 SYSTEM

INPUT PROCESS OUTPUT

FEEDBACK

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 System Decomposition vs.
Versus Interdependence
 What is System Decomposition?
 the process of dividing the system
into smaller subsystem parts.
 by decomposing the system, we can
present the overall system as a
hierarchy and view the relationship
between subordinate and higher-level
subsystem.

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 System Decomposition vs.
Versus Interdependence
 What is System Interdependence?
 a systems ability to achieve its goal
depends on the effective functioning and
harmonious interaction of its subsystem.
 distinct parts are not self-contained
 they are reliant upon the functioning of the
other parts of the system
 all distinct parts must be functioning or the
system will fail

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Elements of a System
1. OUTPUT
2. INPUT
3. PROCESS
4. FEEDBACK
5. CONTROL
6. ENVIRONMENT
7. BOUNDARIES & INTERFACES

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Elements of a System:
1. OUTPUT
First of all, we must determine
what the objectives or goals are,
what we intend to achieve.
Once we know our aim, we can try
to achieve it in the best possible
way.

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Elements of a System:
2. INPUT
Once we know the output, we can
easily determine what the input
should be.

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Elements of a System:
3. PROCESSES
Here we come to the details of
how the inputs & files are
converted into outputs.
Processes may modify the input
totally or partially depending on the
specifications of the output.

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Elements of a System:
4. CONTROL
Control of the system is the decision-
maker that controls the activities of
accepting input processing and
producing output.
For Eg. In an organizational context,
management as a decision making body
controls the inflow, handling, and outflow of
activities that affect the welfare of the business.

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Elements of a System:
5. FEEDBACK

The feedback of the output allows it to be

measured against some standards&
making adjustments in the processing
accordingly.

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Elements of a System:
6. ENVIRONMENT

The environment is the source of

external elements that have an effect on
the system. In fact, it determines how a
system must function.

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Elements of a System:
7. Boundaries & Interfaces
A system should be defined by its
boundaries- the limits that identify its
components, processes & interrelationships
when interfaces with another system.
For Eg.A teller system in a commercial
bank is restricted to the deposits,
withdrawals & related activities of
customers checking and savings accounts.

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 INFORMATION SYSTEM

DATA INFORMATION

INPUT PROCESS OUTPUT

FEEDBACK

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Data Versus Information
 What is DATA?
 Data are raw facts and figures that
are processed to produce
information.
 Example: inventory part number
or sales orders

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Data Versus Information
 What is an Information?
 The term data refers to any and all
of the facts that are collected,
stored, and processed by an
information system.

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Data Versus Information
 What is an Information?
 is data that have been processed and are
meaningful and useful to users.
 The terms “meaningful” and “useful” are value-
laden terms and usually subsume other qualities
such as timeliness, relevance, reliability,
consistency, comparability, etc.

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 SYSTEMS, DATA, AND
INFORMATION

 Information is different from data.

 Information is data that have been
organized and processed to provide
meaning to a user.
 Usually, more information and better
information translates into better
decisions.

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 SYSTEMS, DATA, AND
INFORMATION

 However, when you get more information

than you can effectively assimilate, you suffer
from information overload.
 Example: Final exams week!
 When you’ve reached the overload point, the
quality of decisions declines while the costs
of producing the information increases.

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 SYSTEMS, DATA, AND
INFORMATION

Benefits of information
- Cost of producing information
Value of information

Benefits of information may include:

• Reduction of uncertainty
• Improved decisions
• Improved ability to plan and schedule activities

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 SYSTEMS, DATA, AND
INFORMATION

Benefits of information
- Cost of producing information
Value of information

Costs may include time and resources spent:

• Collecting data
• Processing data
• Storing data
• Distributing information to users

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 SYSTEMS, DATA, AND
INFORMATION

Benefits of information
- Cost of producing information
Value of information
Costs and benefits of information are often difficult to
quantify, but you need to try when you’re making
decisions about whether to provide information.

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Example of information

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Functional Steps in Transforming
Data into Information

 Data collection/Extraction

 capturing, recording,
validating and editing
data for completeness
and accuracy
Hall, Accounting Information Systems, 7e
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Functional Steps in Transforming
Data into Information
 Data Maintenance/
Processing
classifying, sorting,
calculating data

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Functional Steps in Transforming Data
into Information
 Data Management
storing, maintaining
and retrieving data

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Functional Steps in Transforming Data
into Information
 Data Control
 safeguarding and securing
data and ensuring the
accuracy and completeness
of the same.

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Functional Steps in Transforming
Data into Information

 Information
Generation/Data
Transformation
 interpreting, reporting,
and communicating
information
Hall, Accounting Information Systems, 7e
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Characteristics of Useful
Information
 Regardless of physical form or technology, useful
information has the following characteristics:
 Relevance
 Timeliness
 Accuracy
 Completeness
 Summarization

Hall, Accounting Information Systems, 7e CARTS

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Characteristics of Useful
Information
 Relevance:
 The contents of a report or document
must serve a purpose.
 This could be to support a manager’s
decision or a clerk’s task. We have
established that only data relevant to a
user’s action have information content.

Hall, Accounting Information Systems, 7e CARTS

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Characteristics of Useful
Information
 Timeliness
 The age of information is a critical
factor in determining its usefulness.
 Information must be no older than the
time of the action it supports.

Hall, Accounting Information Systems, 7e CARTS

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Characteristics of Useful
Information
 Accuracy
 Information must be free from material errors.
 However, materiality is a difficult concept to
quantify.
 It has no absolute value; it is a problem-specific
concept.
 This means that, in some cases, information
must be perfectly accurate.

Hall, Accounting Information Systems, 7e CARTS

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Characteristics of Useful
Information
 Completeness
 No piece of information essential to a
decision or task should be missing.
 For example, a report should provide all
necessary calculations and present its
message clearly and unambiguously

Hall, Accounting Information Systems, 7e CARTS

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Characteristics of Useful
Information
 Summarization
 Information should be aggregated in
accordance with the user’s needs.
 Lower level managers tend to need
information that is highly detailed. As
information flows upward through the
organization to top management, it
becomes more summarized.
Hall, Accounting Information Systems, 7e CARTS
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Characteristics of Useful
Information
 Cost-Effective
 The quality of doing something well with
no waste of time or money.
 this means that the costs of gathering
information must not over the budget.

Hall, Accounting Information Systems, 7e CARTS

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 What Is an Information System?

 An Information system is a
framework in which data is
collected, processed, controlled
and managed through stages in
order to provide information to
users.
Hall, Accounting Information Systems, 7e
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 What Is an Information System?

An information system is the set

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

Hall, Accounting Information Systems, 7e

James A. Hall
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 What Is an Information System?
 It evolves over time and becomes more
formalized as a firm grows and
becomes more complex. It can be a
manual or computerized system
 Firms depend on information systems
in order to survive and stay competitive

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 The Universal Data Processing
Model

Storage

Processing

Consumers

}
Exchange Events
Internal Events
Environmental Events
Hall, Accounting Information Systems, 7e
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Transactions

 A transaction is a business event.

 Financial transactions
 economic events that affect the assets and equities
of the organization
 e.g., purchase of an airline ticket
 Nonfinancial transactions
 all other events processed by the organization’s
information system
 e.g., an airline reservation — no commitment by the
customer

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 What is Accounting Information
Systems?

 Accounting is an information
system.
 It identifies, collects, processes, and
communicates economic
information about a firm using a
wide variety of technologies.

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 What is Accounting Information
Systems?
 It captures and records the
financial effects of the firm’s
transactions.
 It distributes transaction
information to operations
personnel to coordinate many
key tasks.
Hall, Accounting Information Systems, 7e
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Accounting Information System

 An Accounting Information System

is a unified structure that employs
physical resources and components
to transform economic data into
accounting information for external
and internal users.

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 What Is An AIS?
 A system is a set of two or more
interrelated components that interact to
achieve a goal.
 Systems are almost always composed
of smaller subsystems, each
performing a specific function
supportive of the larger system.

Hall, Accounting Information Systems, 7e 1-62

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 What Is An AIS?
 An accounting information system (AIS)
consists of:
 People
 Procedures & Instructions
 Data
 Software
 Information technology infrastructure
 Internal Control

Hall, Accounting Information Systems, 7e 1-63

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 People
 The people involved with an AIS are the system users. An
AIS helps the different departments within a company
work together. Professionals who may need to use an
organization's AIS include:
• Accountants
• Consultants
• Business analysts
• Managers
• Chief financial officers
• Auditors

Hall, Accounting Information Systems, 7e 1-64

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 AIS versus MIS

 Accounting Information Systems (AIS)

process
 financial transactions; e.g., sale of
goods
 and nonfinancial transactions that
directly affect the processing of financial
transactions; e.g., addition of newly
approved vendors

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 AIS versus MIS

 Management Information
Systems (MIS) process
 MIS describes as a consolidated
reporting system which is designed
specifically to assist managers in
planning, implementing and controlling
the activities of organization.

Hall, Accounting Information Systems, 7e DUGAN 2009

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Management Information System

 An integrated system consisting of human and

machine which is prepare in organization to
produce valuable information for supporting
operations, management and decision making
in an organization.
 This system is a combination of computer
software and hardware, databases and manual
methods and models for analyzing, planning,
controlling and also decision making

Hall, Accounting Information Systems, 7e DAVIS 2010

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Management Information System

 Is designing, presenting and effective using of

information systems in organization.
 It means, although this topic is related to the
managers, but also involves all other members
of the organization and the structure and design
of the organization.
 The term organizational information systems
may be more appropriate, but the term
management information system is more used
and accepted

Hall, Accounting Information Systems, 7ePETER KEEN 2006

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Management Information System

 A System to convert Data from External

and Internal Sources into Information and
to communicate that Information, in an
appropriate form, to Managers at all levels
in all functions to enable them to make
timely and effective decisions for planning,
directing and controlling the activities for
which they are responsible.

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 AIS versus MIS

 Management Information
Systems (MIS) process
 nonfinancial transactions that are
not normally processed by
traditional AIS;
• e.g., tracking customer complaints

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 AIS versus MIS?

IS

AIS MIS

GLS/FRS TPS MRS Finance Marketing Production HRS Distribution

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Business Firm as a System

Organization Organization’
Environment s
of the Firm Information functions
Business System AIS Transaction
Firm Cycles
Operational
Business Events
System
from Operations

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 FUNCTIONS OF AN INFORMATION SYSTEM

ENVIRONMENT

Customers Suppliers

ORGANIZATION
INFORMATION SYSTEM

INPUT PROCESS OUTPUT

FEEDBACK

Regulatory Stockholders Competitors

Agencies
Hall, Accounting Information Systems, 7e
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 TYPES OF INFORMATION SYSTEMS
KIND OF SYSTEM GROUPS SERVED

STRATEGIC LEVEL SENIOR

MANAGERS

MANAGEMENT LEVEL MIDDLE

MANAGERS

KNOWLEDGE LEVEL DATA WORKERS

OPERATIONAL OPERATIONAL LEVEL

MANAGERS

SALES & MANUFACTURING FINANCE ACCOUNTING HUMAN

MARKETING RESOURCES
Hall, Accounting Information Systems, 7e
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 AIS as an MIS Subsystem

Sales/ Production
Marketing Info

AIS

Personnel Finance

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Relationship of AIS & MIS

MIS

Finance Sales/Marketing Production AIS Personnel

Order entry/Sales
Billing/A.Rec./Cash receipts
Purchasing/A. Pay./Cash disb.
Inventory
Payroll
General ledger
Production
Hall, Accounting Information Systems, 7e
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Examples of AIS Subsystems
(Merchandising)
Order entry Purchasing/
Sales A. Payable/
System Cash Disb.
Inventory
System
Shipping System
Receiving

Revenue Expenditure
Cycle Cycle
General
Ledger Human
Billing/ Resource
A. Receivable System Management
Cash Receipts Ext/Fin. reporting (Payroll)
System Tax & req. reporting System
Internal reporting
No Planning/Control, Investment, or Production Cycles reflected here
Hall, Accounting Information Systems, 7e
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Examples of AIS Subsystems:
Production Cycle

Purchasing/
Inventory A. Payable/
System Production
Cash Disb.
System System

Production Cycle
Human
General Resource
Ledger Management
System (Payroll
System

No Revenue, and Investment Cycles reflected here

Hall, Accounting Information Systems, 7e
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Objectives and Users of AIS

 Support day-to-day operations

 Transaction processing
 Support Internal Decision-Making
 Trend Analyses
 Quantitative & Qualitative Data
 Non-transactional sources
 Help fulfill Stewardship Role

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Resources Required for an AIS

 Processor(s): Manual or Computerized

 Data Base(s): Data Repositories
 Procedures: Manual or Computerized
 Input/Output Devices
 Miscellaneous Resources

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Reasons for Studying Accounting
Information Systems

 Career accountants will be users, auditors, and

developers of AIS
 Modern-day AIS are complex because of new
technologies
 Concepts studied in AIS are integrated into every
other accounting course

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Information-Oriented
Professionals
 An array of professionally trained persons from
different fields of study have focused on providing
information to users
 These professionals include system and
managerial accountants and auditors, system
analysts and industrial engineers
 Professional certifications are increasing. These
include Certified Computing Professional,
Certified Information Systems Auditor,
Certified Managerial Accountant, Certified
Fraud Examiner, etc.
Hall, Accounting Information Systems, 7e
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Roles of Accountants With
Respect to an AIS
 Financial accountants prepare
financial information for external
decision-making in accordance with
GAAP
 Managerial accountants prepare
financial information for internal
decision-making
 Accounting managers - control all
accounting activities of a firm.

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Roles of Accountants With
Respect to an AIS
 To understand how the accounting system works.
 How to collect data about an organization’s
activities and transactions
 How to transform that data into information that
management can use to run the organization
 How to ensure the availability, reliability, and
accuracy of that information

Hall, Accounting Information Systems, 7e 1-84

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Roles of Accountants With
Respect to an AIS

 Auditors
 evaluate controls and attest to the
fairness of the financial statements.
 Auditors need to understand the
systems that are used to produce a
company’s financial statements

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Roles of Accountants With
Respect to an AIS

 Tax specialists
 develop information that reflects tax
obligations of the firm.
 Tax professionals need to understand
enough about the client’s AIS to be
confident that the information used for tax
planning and compliance work is
complete and accurate.
Hall, Accounting Information Systems, 7e
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Roles of Accountants With
Respect to an AIS

 Consultants
 devise specifications for the AIS.
 One of the fastest growing types of
consulting services entails the design,
selection, and implementation of new
Accounting Information Systems.

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Ethical Standards for Consulting
 Professional competence
 Exercise due professional care
 Plan and supervise all work
 Obtain relevant data to support reasonable
recommendations
 Maintain integrity and objectivity
 Understand and respect the responsibilities of
all parties
 Disclose any conflicts of interest
Hall, Accounting Information Systems, 7e
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 End of Topic

See you next week

Hall, Accounting Information Systems, 7e
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.