CHAPTER 1: Information system an Information systems framework – there is

accountant’s perspective for need to us to collect the data (daily sales

Data (raw) fare facts which may or may not
be processed no direct effect on user’s
actions
Information (processed) causes a user to
take an action that would otherwise not have
been taken
Information – set of data
record) and process into information and
distributed to users (EXTERNAL)
 Who are the demographics of our
information (age, gender)
 Processed them to according to their
profile
 Idea for those data transformed to
information

Information system – flow of the data Opportunity: come out with the idea from
the data and be used by the management for
Information is a business resource decision
In charge of the terms is the board of Transaction is event that effects of interest
directors of the organization and is processed by its
information system
 Top management : president, ceo,
coo, responsible for longer-term NOTE: (Accounting transaction) Arm length
planning and setting organizational transaction: normally there is something you
objectives had received from something you had given
 Middle management : responsible of
disposition of short term planning  Financial transaction (accounting
 Operations management : in charge transaction) information/ data
of day to day operation processed by accounting information
 Flow of information: Directives system
wherein what is our vision mission  Non-financial transaction doesn’t
goal coming from top management meet definition of a financial
down to ordinary employees transaction
 Bottom from the top MIS application in functional area
 Top bottom flow of information example
Objective of information system is to Finance:
support (INTERNAL)
 Portfolio management systems -
 Aid management for its decision different set of investments,
 Guides management for steward monitoring of investment
function (e.g. are we intact with our  Capital budgeting system –
company mission) considering whether to go or not to
go to investment project
Marketing: Management reporting system MRS
(Internal Users)
 Market analysis – need to consider
know your client: demographics  provides internal information needed
to manage business and handles
Distribution: discretionary reporting for internal
 What item users (cost accounting information)
 Who to deliver Database management – the overall of the
 How to deliver process information
*wrong item deliver or wrong person End users
delivery might happen
 External users
Personnel:  Internal users – interested in
management reporting system
 Employee benefits system –
(discretionary information)
personnel day(awarding the
employee) categorizing of employee Distributes essential financial information to
support operations
AIS Subsystem

Transaction processing system  Data (raw) fare facts which may or

 Converts economic events into
financial transactions
 Records financial transactions in the
accounting record
 Distributes essential financial
information to support operations
General ledger/Financial reporting system
FRS (External users)
 Takes information from the TPS
 Updates general ledger control
accounts
 Handles nondiscretionary reporting
requirements
may not be processed no direct effect
on user’s actions
 Information (processed) causes a
user to take an action that would
otherwise not have been taken
 Data sources are financial transaction
that enter the information system for
internal or external sources
Data collection is the first operation stage in
the information system
Objective to ensure data are valid
complete free from errors (if not,
management or users of information will be
misled)

 Relevant data should be captured

 Collect data only once
Data processing range from simple to
complex – to process the data to use the
information that is not misleading
Organization database is its physical
repository (library) for financial and non-
financial data (memory)
Level in data hierarchy
 Data attribute most elemental piece
of potential useful data
 Record is a complete set of attributes
for a single occurrence within an
entity class
 File is a complete set of records of
an identical class
General model for AIS
Information generation is the process of
compiling arranging formatting and
presenting information to users
Useful information
 Relevance – serve a purpose
 Timeliness – no older than time
frame of supported action
 Accuracy – free from errors
 Completeness all essential
information is present
 Summation aggregated of user’s
needs
Feedback is a form of output sent back to
the system as a source of data
NOTE: Reconciling of information for
feedback
Functional segmentation
 Materials management (planning or
logistic) – purchasing, receiving and
stores
 Production
 Marketing
 Distribution
 Personnel
 Finance
Accounting function
 Accounting manages financial
resource of the firm
 Distributes transactions information
to operations personnel
 Value of information is determined
by its reliability
 Unreliable information has no value
Information reliability requires accounting
independence
Information technology
NOTE: Employ combination of centralized
and distributed processing
 Centralized data processing all
data processing performed by large
computers in a common
 Distributed data processing user
segment possessing it needs to
support their operations users
function independently and tend not
to share data and information
System development
-all the data
-what do we want to achieve
-we can come up system development
-it can be built or purchased
-depends on the need of the company or the
resource of the company
Two types of software
Commercial software
-available for general accounting and
industry specific applications
-of the shelves (pitch tree accounting)
-turnkey systems because can be
implemented with little modification
Custom software
-there is need to customize the system
according to your organization
-developed through formal process called
the system development life cycle
-specified objective for the system
-requires qualified individuals
Systems maintenance may be trivial or
significant
-there is always a risk for the system
maintenance
 Retrieval – how can i able to gather
the information if the system is down
-debug unnecessary information
-the uses of auto save of the Microsoft word
-storing of information or back up
information drive
-for the needs of data retrieval
Centrally organized companies with shared
data use database administration to ensure
security and integrity
-the storage of the data should be cleaned by
database administration
-if other than database administration is had
access in the storage can be question of
integrity of the data
Network is a collection of computers and
communication devices that allow users to
communicate, access data and applications
and share information and resources
-access of information from one computer to
other
Network administration responsible for
effective functioning of hardware and
software
-ensure the connectivity of one computer to
other
Due to highly technical dynamically
changing and expense of IT many
executives look to it sourcing
-the change is immediate in IT world
-outsource of type of business
Cloud computing – the data can be stored
on the software applications

Role of accountant in AIS
Accountant plays a prominent role on
system development teams as domain
experts
-accountant knows the process
-accountant and it should work together
-responsible for many aspects of the
conceptual system including specifying
rules, reporting requirements and internal
control objectives
IT professionals determine the most
economical and effective technologies for
the physical system, including data storage
Accountant perform audits which typically
involve the AIS
-it is only the accountant who may judge if
the system is operating effectively
-certified information person is the best to
judge the information technology
External auditing - is an independent
attestation and opinion
-requires auditors to test internal controls
and perform substantive tests of data
-critical element is auditor independence
-auditor is free from factors that might
influence the audit report
Internal auditing – is an independent
appraisal function
External auditor – protect the interest of
the public, because the public will relay to it
-provide opinion of the Financial statement
of the company
-the client may have conflict of interest
Internal auditor – day to day operation
-examine/evaluate the activities within the
organization
-they serve the management of the
organization
-presence of the auditor
-report to the audit committee
-audit committee assist the management
-audit committee serves as check of balance
-external auditor can be reliant to internal
auditor
SOX – Sarbanes - Oxley
Enron scandal – Enron is the business, the
auditor is Arthur Andersen
SOX legislation restricts non-audit services
that auditors may provide and prohibits
auditors from providing:
-other accounting service
-management or human resources

-legal services and expert services unrelated

to the audit

Sarbanes Oxley is a major financial

organization in US

-note they are congress or senate

-Enron is the no.1 audit firm in the world

-Arthur Andersen is the auditor of the SOX