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At last – the Australasian edition of Romney and Steinbart’s
respected AIS text!
i n f o r m At i o n
The Australasian edition of Accounting Information Systems offers
Accounting
Accounting
the most up-to-date, comprehensive and student-friendly coverage of
SyStemS
accounting information systems in Australia, New Zealand and Asia.
This adaptation of Accounting Information Systems has been

extensively revised and updated to incorporate local laws, standards i n f o r m At i o n
SyStemS
and business practices. The text has a new and flexible structure
developed especially for Australasian AIS courses, while also
retaining the features that make it easy to use.
This text offers coverage of important concepts such as systems,

marshall B. romney
cycles, controls, auditing, fraud and cybercrime, ethics and the REA Paul John Steinbart
data model, brought to life by a wide variety of Australasian case Joseph m. mula
studies and examples.
marshall B. romney
ray mcnamara
Paul John Steinbart
Joseph m. mula
trevor tonkin
ray mcnamara
trevor tonkin
ISBN 978-1-4425-4259-4
9 781442 542594
Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2012 – 9781442542594 - Romney/Accounting Information Systems 1st edition
ACC INFO SYSTEMS FINAL.indd 1 30/7/12 3:13:43 PM

contents vii
Problems 80 Commitment to integrity, ethical values and

Case 3.1 Dub 5 92 competence 142
Organisational structure 143
AIS in action solutions: Quiz key 93
Methods of assigning authority and
Comprehensive problem solution 95
responsibility 143
CHAPTER 4 Files, database systems and Human resources standards 143
relational databases 102 External influences 145
Introduction 103 Objective setting 145
File versus databases 103 Risk assessment and risk response 146
Using data warehouses for business Control activities 148
intelligence 104 Proper authorisation of transactions and
Advantages of database systems 105 activities 149
Importance of good data 105 Separation of duties 150
Database systems 106 Project development and acquisition controls 152
Logical and physical views of data 106 Change management controls 152
Schemas 107 Design and use of documents and records 152
Data dictionary 107 Safeguard assets, records and data 153
DBMS languages 108 Independent checks on performance 153
Relational databases 108 Information and communication 154
Types of attributes 108 Monitoring 154
Designing a relational database for S&S 108 Conduct periodic audits 155
Basic requirements of a relational database 110 Employ a computer security office and a chief
compliance officer 156
Two approaches to database design 112
Engage forensic specialists 156
Creating relational database queries 113
Install fraud detection software 156
Database systems and the future of
Implement a fraud hotline 157
accounting 120
Summary and case conclusion 157
Key terms 158
Key terms 121
AIS in action: Chapter quiz 158
Ethical issue 160
Ethical issue 122
Discussion questions 160
Comprehensive problem 122
Problems 161
Case 5.1 The Greater Providence
Problems 124
Deposit & Trust embezzlement 168
Case 4.1 Research project 129
Comprehensive problem solution 131 CHAPTER 6 Accounting information system
development strategies 174
CHAPTER 5 Control in accounting Introduction 175
information systems 134
Purchasing software 176
Introduction 136
Selecting a vendor 176
Why threats to accounting information
Acquiring hardware and software 176
systems are increasing 136
Evaluating proposals and selecting a system 177
Overview of control concepts 137
Development by in-house information
Foreign Corrupt Practices Act and
Sarbanes-Oxley Act 138 systems departments 177
End-user-developed software 179
Control frameworks 139
Advantages and disadvantages of end-user
COBIT framework 139
computing 181
COSO’s Internal Control framework 140
Managing and controlling end-user
COSO’s Enterprise Risk Management computing 182
framework 140
Outsourcing the system 182
The Enterprise Risk Management framework
versus the Internal Control framework 141 Advantages and disadvantages of
outsourcing 183
Internal environment 141
Business process management 186
Management’s philosophy, operating style
and risk appetite 142 Internal controls in a business process
management system 186
Board of directors 142
Romney_prelims.indd 7 26/7/12 9:40:52 AM

viii accounting information systems
Prototyping 187 Ordering materials, supplies and

When to use prototyping 188 services 245
Advantages of prototyping 188 Identifying what, when and how much to
Disadvantages of prototyping 189 purchase 245
Computer-aided software engineering 190 Choosing suppliers 247
Summary and case conclusion 190 Receiving 249

Key terms 191 Approving supplier invoices 250
AIS in action: Chapter quiz 191 Cash payments 253
Ethical issue 192 Expenditure cycle information needs 254
Chapter case: Freedom from telemarketers— Summary and case conclusion 255
the ‘Do Not Call’ Register 193 Key terms 256
Discussion questions 193 AIS in action: Chapter quiz 256
Problems 194 Ethical issue 257
Case 6.1 Steffie Salon Concepts 199 Discussion questions 257
AIS in action solutions: Quiz key 201 Problems 258
Chapter case solution 203 Case 8.1 Research project: Impact of IT on
expenditure cycle activities 261
PART II Accounting information AIS in action solutions: Quiz key 261
system cycles 205
CHAPTER 9 The human resources
CHAPTER 7 The revenue cycle: Sales to cash management cycle/payroll
collections 206 subcycle 264
Theories underpinning system cycles 208 Introduction 265
Introduction 209 Human resources management cycle
Revenue cycle subsystem 211 subsystem 266
Sales order entry 212 Overview of human resources management
process and information needs 266
Taking customer orders 213
Payroll subsystem activities 268
Credit approval 214
Update payroll master database 269
Checking inventory availability 214
Validate time and attendance data 270
Responding to customer enquiries 215
Prepare payroll 271
Shipping 217 Distribute payroll 274
Pick and pack the order 217 Calculate and pay employer-paid benefits
Ship the order 218 taxes and voluntary employee deductions 275
Billing 221 Outsourcing options: Payroll service
Invoicing 221 bureaus and professional employer
Maintain (update) accounts receivable 222 organisations 276
Cash collections 224 Summary and case conclusion 276
Revenue cycle information needs Key terms 277
and reporting 227 AIS in action: Chapter quiz 277
Summary and case conclusion 230 Ethical issue 278
Key terms 230 Discussion questions 279
AIS in action: Chapter quiz 231 Problems 279
Ethical issue 232 Case 9.1 R esearch report: HRM opportunities
Discussion questions 232 for CPAs 283
Problems 232 AIS in action solutions: Quiz key 284
Case 7.1 Research project: Impact of IT on
CHAPTER 10 The production cycle 288
revenue cycle activities 236
Introduction 290
Production cycle information system 290
CHAPTER 8 The expenditure cycle: Product design 291
Purchasing to cash payments 240
Planning and scheduling 293
Introduction 241 Production planning methods 293
Expenditure cycle subsystem 242 Key documents and forms 294
Process 242
Production operations 298

contents ix
Cost accounting 298 Accounting information system

Raw materials usage data 299 threats 340
Direct labour costs 299 Fraud and its prevalence 343
Machinery and equipment usage 299 Misappropriation of assets 344
Manufacturing overhead costs 299 Fraudulent financial reporting 345
Improved control with activity-based costing
systems 300 ASA 240 The Auditor’s Responsibilities
Improved control with innovative Relating to Fraud in an Audit of a
performance metrics 302 Financial Report 346
Summary and case conclusion 304 Who perpetrates fraud and why 347
Key terms 305 Computer fraud 352
AIS in action: Chapter quiz 305 Rise in computer fraud 352
Ethical issue 306 Computer fraud classifications 353
Discussion questions 306 Preventing and detecting fraud and

Problems 306 abuse 356
Case 10.1 The accountant and CIM 310 Summary and case conclusion 357
AIS in action solutions: Quiz key 310 Key terms 358
CHAPTER 11 The general ledger and Ethical issue 360
reporting cycle 314 Discussion questions 360
Introduction 315 Problems 361
General ledger and reporting cycle Case 12.1 Bookkeepers: Portrait of
subsystem 317 white-collar criminals 366
Update general ledger 317 Case 11.2 Heirloom Photo plans 367
Post adjusting entries 318 AIS in action solutions: Quiz key 369
Prepare financial statements 319 CHAPTER 13 Cybercrime: Computer attack
Transition from GAAP to IFRS 319 and abuse techniques 374
XBRL: Revolutionising the reporting process 319
Introduction 375
Produce managerial reports 324
Computer attacks 375
Responsibility accounting and flexible
budgeting 324 Social engineering 385
The balanced scorecard 325 Malware 389
Principles of proper graph design 327 Summary and case conclusion 398
Summary and case conclusion 329 Key terms 399
Key terms 330 AIS in action: Chapter quiz 400
AIS in action: Chapter quiz 330 Ethical issue 401
Ethical issue 331 Discussion questions 401
Discussion questions 331 Problems 402
Problems 331 Case 13.1 Shadowcrew 409
Case 11.1 Keeping current with XBRL 334 AIS in action solutions: Quiz key 410
Case 11.2 Evaluating a general ledger
package 334 CHAPTER 14 Information systems controls
for system reliability—Part 1:
Information security 418
PART III Fraud, controls and audit in Introduction 419
accounting information Two fundamental information
systems 337 security concepts 422
1 Security is a management issue not a
CHAPTER 12 Fraud: Prevalence, prevention technology issue 422
and detection in accounting 2 Defence-in-depth and the time-based
information systems 338 model of information security 424
Theories underpinning fraud and Understanding targeted attacks 425

control 339 Preventive controls 425
Introduction 340 Training 425
User access controls 426

x accounting information systems
Physical access controls 429 Problems 474

Network access controls 430 Case 15.1 Protecting privacy of tax returns 477
Device and software hardening controls 437 Case 15.2 Generally Accepted Privacy
Detective controls 438 Principles 478
Log analysis 439 AIS in action solutions: Quiz key 478
Intrusion detection systems 439
Managerial reports 440
CHAPTER 16 Information systems controls
Security testing 440
for system reliability—Part 3:
Processing integrity and
Corrective controls 440
availability 482
Computer incident response team 440
Introduction 483
Chief information security officer (CISO) 441
Patch management 441 Processing integrity 483
Input controls 483
Security implications of virtualisation
Processing controls 486
and the cloud 442
Output controls 487
Illustrative example: Credit sales processing 488
Key terms 443
Processing integrity controls in spreadsheets 490
Availability 492
Ethical issue 445
Minimising risk of system downtime 492
Discussion questions 445 Recovery and resumption of normal operations493
Problems 446 Summary and case conclusion 498
Case 14.1 Costs of preventive security 449 Key terms 498
Case 14.2 Developing an information security AIS in action: Chapter quiz 499
checklist 449
Ethical issue 500
CHAPTER 15 Information systems controls Problems 500
for system reliability—Part 2: Case 16.1 Ensuring systems availability 507
Confidentiality and privacy 452 Case 16.2 Change controls 507
Introduction 453 AIS in action solutions: Quiz key 507
Preserving confidentiality 453
CHAPTER 17 Transaction cycles: Threats and
Identification and classification of
information and data to be protected 453 control procedures 510
Protecting confidentiality with encryption 454 Introduction 511
Controlling access to sensitive information 454 Revenue cycle: Threats and controls 514
Training 456 General issues 514
Privacy 456 Sales order entry 517
Privacy controls 456 Shipping 521
Privacy concerns 457 Billing 522
Privacy regulations and Generally Accepted Cash collections 523
Privacy Principles 459 Expenditure cycle: Threats and
Encryption 463 controls 524
Factors that influence encryption strength 463 General issues 525
Types of encryption systems 465 Ordering 525
Hashing 466 Receiving 531
Digital signatures 467 Approving supplier invoices 532
Digital certificates and public key Human resources management
infrastructure 468
cycle/Payroll subcycle: Threats
Illustrative example: The role of encryption
and controls 535
and hashing in e-business 469
General issues 535
Virtual private networks 470
Payroll master file update 538
Validate time and attendance data 539
Key terms 472 Prepare payroll 540
AIS in action: Chapter quiz 472 Distribute payroll 541
Ethical issue 473 Distribute withholding taxes and
Discussion questions 474 miscellaneous deductions 542

contents xi
Production cycle: Threats and controls 542 Systems development 611

General issues 543 The systems development life cycle 611
Product design 543 The players 613
Planning and scheduling 545 Planning systems development 614
Production operations 545 Planning techniques 615
Cost accounting 547 Feasibility analysis 616
General ledger and reporting cycle: Capital budgeting: Calculating economic
Threats and controls 548 feasibility 617
General issues 548 Behavioural aspects of change 618
Update general ledger 550 Why behavioural problems occur 618
Post adjusting entries 553 How people resist change 619
Prepare financial statements 553 Preventing behavioural problems 620
Produce managerial reports 554 Systems analysis 621
Summary and case conclusion 554 Initial investigation 621
Key terms 558 Systems survey 622
AIS in action: Chapter quiz 558 Feasibility study 624
Discussion questions 559 Information needs and systems requirements 624
Problems 559 Systems analysis report 626
Case 17.1 Research project: Impact of IT Summary and case conclusion 626
on cycle activities, threats and controls 573 Key terms 627
AIS in action solutions: Quiz key 573 AIS in action: Chapter quiz 630
CHAPTER 18 Auditing computer-based
information systems 578 Discussion questions 631
Problems 632
Introduction 579
Case 19.1 Audio Visual Corporation 638
The nature of auditing 580
Overview of the audit process 580
The risk-based audit approach 583 Comprehensive problem solution 641
Information system audits 583 CHAPTER 20 Systems design, implementation
Objective 1: Overall security 583 and operation 644
Objective 2: Program development and Introduction 645
acquisition 584
Conceptual systems design 645
Objective 3: Program modification 586
Evaluate design alternatives 645
Objective 4: Computer processing 588
Prepare design specifications and reports 647
Objective 5: Source data 591
Objective 6: Data files 592 Physical systems design 647
Output design 648
Audit software 593
File and database design 648
Operational audits of an AIS 594
Input design 649
Summary and case conclusion 595 Program design 650
Key terms 595 Procedures and controls design 651
AIS in action: Chapter quiz 596 Systems implementation 652
Ethical issues 597 Implementation planning 652
Discussion questions 597 Site preparation, install and test hardware 653
Problems 598 Selecting and training personnel 653
Case 18.1 Preston Manufacturing 602 Complete documentation 654
AIS in action solutions: Quiz key 603 Test system 655
Systems conversion 655
PART IV The systems development Operation and maintenance 656
life cycle process 607 Summary and case conclusion 658
CHAPTER 19 Systems development and Key terms 659
systems analysis 608 AIS in action: Chapter quiz 659
Theories underpinning systems Chapter case: Hershey’s big bang ERP 660
development life cycle 609 Discussion questions 660
Introduction 610 Problems 661

xii accounting information systems
Case 20.1 Citizen’s Gas Company 667 Using REA diagrams to retrieve
AIS in action solutions: Quiz key 668 information from a database 715
Chapter case solution 670 Creating journals and ledgers 715
Generating financial statements 716
PART V The REA data model 671 Creating managerial reports 717
CHAPTER 21 Database design using the Key term 717
REA data model 672 AIS in action: Chapter quiz 718
Introduction 673 Comprehensive problem 719
Theoretical foundation for the Discussion questions 719
REA data model in AIS 673 Problems 720
Quality information for Case 22.1 Practical database design 721
decision-making 674 AIS in action solutions: Quiz key 721
Database design process 674 Comprehensive problem solution 723
Entity-relationship diagrams 675
CHAPTER 23 Special topics in REA modelling 726
REA data model 676
Three basic types of entities 676 Introduction 727
Structuring relationships: The basic REA Additional revenue and expenditure
template 677 cycle modelling topics 727
Developing an REA diagram 679 Additional revenue cycle events and attribute
Step 1: Identity relevant events 680 placement 727
Step 2: Identify resources and agents 682 Additional expenditure cycle events and
attribute placement 730
Step 3: Determine cardinalities of
relationships 682 Sale of services 731
Acquisition of intangible services 732
Digital assets 733
Key terms 689
Rental transactions 733
Additional REA features 735
Employee roles 735
M:N agent-event relationships 735
Problems 693 Locations 735
Case 21.1 REA data modelling extension 696 Relationships between resources and agents 735
AIS in action solutions: Quiz key 696 Production cycle REA model 735
Comprehensive problem solution 700 Additional entities: Intellectual property 736
CHAPTER 22 Implementing an REA model Production cycle events 738
in a relational database 704 New REA feature 738
Introduction 705 Combined HRM/payroll data model 739

Human resources management cycle entities 739
Integrating REA diagrams across
Tracking employees’ time 740
cycles 705
Financing activities data model 741
Rules for combining REA diagrams 708
Merging redundant resource entities 708
Merging redundant event entities 709 AIS in action: Chapter quiz 744
Validating the accuracy of integrated REA Discussion questions 745
diagrams 710 Problems 746
Implementing an REA diagram in a Case 23.1 Practical database assignment 750
relational database 710 AIS in action solutions: Quiz key 751
Step 1: Create tables for each distinct Appendix: Extending the REA model to
entity and M:N relationship 710 include information about policies 754
Step 2: Assign attributes to each table 711
Step 3: Use foreign keys to implement Glossary 756
1:1 and 1:N relationships 713
Index 780
Completeness check 714

Preface
To the student
The first edition of Accounting Information Systems is designed to prepare you for a successful
career in public practice, industry, or government whether that be in accounting, management or
information systems. All of you will be users of accounting information systems (AISs) for it is
the key system that collects data on all economic or financial activities undertaken by all organi-
sations. As such, you should participate in the design of those systems so you receive or extract
the information you need to make informed decisions.
Doing so effectively, however, requires that you have a sound understanding of how they
function. In addition to being users, some of you will become managers. Others will become
internal and external auditors and some of you will become consultants not just in accounting
but also information systems. All of these roles require you to understand how AISs operate so
that you can measure their cost-effectiveness, assess their reliability and the reliability of the
information produced, or be involved in the design and implementation of new and redesigned
systems. Mastering the material presented in this text will give you the foundational knowledge
you need in order to excel at all these tasks.
This text discusses important new information technology (IT) developments, such as
virtualisation, cloud computing, use of radio-frequency identification (RFID) tags to track inven-
tory and adoption of XBRL for financial reporting, because such developments affect business
processes and often cause organisations to redesign their accounting systems to take advantage
of new capabilities. The focus, however, is not on IT for the sake of IT, but on how IT affects
business processes and controls. Indeed, new IT developments not only bring new capabili-
ties, but also often create new threats and affect the overall level of risk. This text will help you
understand these issues so that you can properly determine how to modify accounting systems
controls to effectively address those new threats and accurately assess the adequacy of controls
in those redesigned systems. We also discuss the effect of regulatory changes, most notably the
Sarbanes–Oxley Act and International Financial Reporting Standards (IFRS), on the design and
operation of accounting systems. These changes brought new responsibilities on owners, direc-
tors, managers and employees to act more ethically following some major corporate collapses
and frauds. Thus a framework to analyse ethical issues has been provided so you have a way of
analysing ethical dilemmas you will encounter during your working life.
In addition to technology- and regulatory-driven changes, companies are responding to the
increasingly competitive business environment by re-examining every internal activity in an
effort to reap the most value at the least cost. As a result, accountants are being asked to do more
than simply report results of past activities. They must take a more proactive role in both provid-
ing and interpreting financial and non-financial information about the organisation’s activities.
Therefore, throughout this text we discuss how accountants can improve the design and
functioning of an AIS so that it truly adds value to an organisation.

xiv accounting information systems
Key learning objectives

When you finish reading this text, you should understand the following key concepts:
d the basic activities performed in the major business cycles
d what data need to be collected to enable managers to plan, evaluate and control the
business activities in which an organisation engages
d how IT developments can improve efficiency and effectiveness of business processes
d how to design an AIS to provide information needed to make key decisions in each
business cycle
d the risk of fraud as well as motives and techniques used to perpetrate fraud including
cybercrimes
d how to analyse an ethical dilemma and recommend a solution to an ethical issue in an
AIS context
d the Committee of Sponsoring Organizations (COSO) and COSO-ERM models for internal
control and risk management, as well as the specific controls used to achieve those objectives
d the Control Objectives for Information and Related Technology (COBIT) framework
for the effective governance and control of information systems and how IT affects the
implementation of internal controls
d the Trust Services framework of the American Institute of Certified Practicing Accountants
(AICPA) for ensuring systems reliability by developing procedures to protect the
confidentiality of proprietary information, maintain the privacy of personal information
collected from customers, assure the availability of information resources and provide for
information processing integrity
d fundamentals of computer information security
d goals, objectives and methods for auditing information systems
d fundamental concepts of database technology and data modelling and their effect on an AIS
d the tools for documenting how AISs work, such as data flow diagrams, flowcharts and
REA diagrams
d the basic steps in the system development process to design and improve an AIS.
Features to facilitate learning

To help you understand these concepts, the text includes the following features:
d ach chapter begins with an integrated case that introduces that chapter’s key
E
concepts and topics and identifies several key issues or problems that you should
be able to solve after mastering the material presented in that chapter. The case is
referenced in the chapter and the chapter summary presents solutions to problems and
issues raised in the case.
d Focus boxes and real-world examples help you understand how organisations are using
the latest IT developments to improve their AISs.
d Hands-on spreadsheet exercises in many chapters help you hone your computer skills.
Many of these exercises are based on ‘how-to’ tutorials that appeared in issues of journals.
d Numerous problems in every chapter provide additional opportunities for you to
demonstrate your mastery of key concepts. In most chapters there is an ethical issue for
you to consider and analyse. Many problems were developed from reports in current
periodicals. Other problems were selected from the various professional examinations,
including the CPA, CMA, CIA and SMAC exams.
d Cases in each chapter require more extensive exploration of specific topics.
d Chapter quizzes at the end of each chapter enable you to self-assess your understanding of
the material. We also provide detailed explanations about the correct answer to each quiz
question.
d Extensive use of graphics enhances your understanding. The text contains hundreds of
figures, diagrams, flowcharts and tables that illustrate the concepts taught in the chapters.
d A comprehensive glossary located at the back of the book makes it easy to look up the
definition of the various technical terms used in the text as well as a list of terms at end of
each chapter.
d A list of acronyms is provided on the inside of the back cover for quick and easy reference.

preface
xv
Content and organisation
This text is divided into five parts, each focused on a major theme.
Part I: Foundations of accounting information systems
Part I consists of six chapters that lay the foundation for the whole text and present the underlying
concepts fundamental to an understanding of AIS. Chapter 1 introduces a theoretical framework
that underlies information systems as well as the basic terminology and discusses how an AIS can
add value to an organisation. The stakeholder analysis framework is also introduced to provide
a method for you to use to analyse ethical issues you will encounter during your working life.
Chapter 2 provides an overview of basic business processes. It introduces transaction processing
in automated systems, presenting basic information processing and data storage concepts. You
will see the wide range of data that must be collected by the AIS. This information helps you to
understand what an AIS does; as you read the remainder of the text, you will see how advances
in IT affect the manner in which those functions are performed.
Chapter 3 covers two of the most important tools and techniques used to understand, evaluate,
design and document information systems: data flow diagrams and flowcharts. Chapter 4 intro-
duces the topic of databases, with a particular emphasis on the relational data model.
In Chapter 5 you are introduced to controls in AISs, which are discussed in more detail
in Part III. It uses the COSO framework, including the expanded enterprise risk management
(COSO-ERM) model, to discuss the basic concepts of internal control.
Finally, Chapter 6 describes AIS development strategies including purchasing, building and
outsourcing information systems, as well as development tools and techniques such as proto
typing and computer-aided software engineering (CASE).
Part II: Accounting information system cycles
Part II focuses on how an organisation’s AIS provides critical support for its fundamental business
processes or cycles. Most large and many medium-sized organisations use enterprise resource
planning (ERP) systems to collect, process and store data about their business processes, as well
as to provide information reports designed to enable managers and external parties to assess an
organisation’s efficiency and effectiveness. To make it easier to understand how an ERP system
functions, Part II consists of five chapters, each focusing on a particular business process.
Chapter 7 covers the revenue cycle, describing all activities involved in taking customer
orders, fulfilling those orders and collecting cash. Chapter 8 covers the expenditure cycle,
describing all activities involved in ordering, receiving and paying for merchandise, supplies
and services. Chapter 9 covers the human resources management cycle, focusing primarily on
the activities involved in processing payroll. Chapter 10 covers the production cycle, with a
special focus on the implications of recent cost accounting developments, such as activity-based
costing, for the design of the production cycle information system. Chapter 11 covers the general
ledger and reporting activities in an organisation, discussing topics such as XBRL, the balanced
scorecard, the switch from GAAP to IFRS and the proper design of graphs to support managerial
decision making. Each of these five chapters explains the three basic functions performed by the
AIS: function of cycle, efficient transaction processing and preparation of information useful for
effective decision making.
Part III: Fraud, controls and audit in accounting information systems
The seven chapters in Part III focus on threats to the reliability of AISs and applicable controls
for addressing and mitigating risks associated with those threats. Chapter 12 discusses fraud and
explains how and why it occurs. Chapter 13 continues the discussion of cybercrime, focusing
specifically on computer attacks and abuse techniques. Chapters 14 to 16 use both COBIT and
the AICPA’s Trust Services frameworks to discuss effective governance and control of informa-
tion systems. Chapter 14 introduces the fundamental concepts of defence-in-depth and the time-
based approach to security. The chapter provides a broad survey of a variety of security topics,
including access controls, firewalls, encryption and incident detection and response. Chapter 15
discusses the many specific computer controls used in business organisations to achieve objec-
tives of ensuring privacy and confidentiality and it includes a detailed explanation of encryption.
Chapter 16 addresses the controls necessary to achieve the objectives of accurate processing
of information and ensuring that information is available to managers whenever and wherever

xvi accounting information systems
they need it. Chapter 17 discusses the provision of adequate internal controls to safeguard assets
(including data) for each of the AIS cycles in Part II. Chapter 18 describes principles and tech-
niques for the audit and evaluation of internal control in a computer-based AIS and introduces
the topic of computer-assisted auditing.
Part IV: The systems development life cycle process
Part IV consists of two chapters that cover various aspects of the systems development process.
Chapter 19 introduces the systems development life cycle (SDLC) and discusses the intro-
ductory steps of this process (systems analysis, feasibility and planning). Particular emphasis is
placed on the behavioural ramifications of change. Chapter 20 covers the remaining stages of the
SDLC (conceptual design, physical design, implementation and operation and maintenance) and
emphasises the interrelationships among the phases.
Part V: The REA data model
Part V consists of three chapters that focus on the REA data model, which provides a conceptual
tool for designing and understanding the database underlying an AIS. Chapter 21 introduces the
REA data model and explains how it can be used to design an AIS database. The chapter focuses
on modelling the revenue and expenditure cycles. It also demonstrates how the REA model
can be used to develop an AIS that not only can generate traditional financial statements and
reports but also can more fully meet the information needs of management. Chapter 22 explains
how to implement an REA data model in a relational database system and shows how to query
a relational database in order to produce various financial statements and management reports.
Chapter 23 explains how to develop REA data models of the production, human resources man-
agement/payroll and financing cycles. It also discusses a number of advanced modelling issues,
such as the acquisition and sale of intangible products and services and rental transactions.
Comparative table of contents for users of US editions

Users of US editions of this text can use the following correlation table to see changes in the
organisation of content for the first Australasian edition of Accounting Information Systems.
US 12th US 11th
edition edition
Chapter chapter chapter Chapter title
Part 1 Foundations of accounting information systems
1 1 1 Accounting information systems: Theoretical foundations and
overview
2 2 2 Fundamentals of business processes and transaction processing
3 3 3 Systems development and documentation techniques
4 4 4 Files, database systems and relational databases
5 7 6 Controls in accounting information systems
6 21 19 Accounting information system development strategies
Part 2 Accounting information systems cycles
7 12 10 The revenue cycle: Sales to cash collections
8 13 11 The expenditure cycle: Purchasing to cash payments
9 15 13 The human resources management cycle/payroll subcycle
10 14 12 The production cycle
11 16 14 The general ledger and reporting cycle
Part 3 Fraud, controls and audit in accounting information systems
12 5 NA Fraud: Prevalence, prevention and detection in accounting
information systems
13 6 5 Cybercrime: Computer attack and abuse techniques
14 8 7 Information systems controls for system reliability—Part 1:
Information security
Confidentiality and privacy

preface
xvii

Processing integrity and availability
17 12, 13, 14, 10, 11, 12, Transaction cycles: Threats and control procedures
15, 16 13, 14
18 11 9 Auditing computer-based information systems
Part 4 The systems development life cycle process
19 20 18 Systems development and systems analysis
20 22 20 Systems design, implementation and operation
Part 5 The REA data model
21 17 15 Database design using the REA data model
22 18 16 Implementing an REA model in a relational database
23 19 17 Special topics in REA modelling
To the instructor
This text is intended for use in a one-semester course in accounting information systems (AISs)
at the undergraduate or graduate level, if used in its entirety. However, instructors have the flex-
ibility to mould a course based on the emphasis they wish to pursue depending on the objectives
of their courses. Part I provides the foundations of AISs. It is the base on which the remainder
of the text is based. Thus Part I can be used as a standalone course for non-accounting students
or managers or in combination with any of Parts II to V. For a course that emphasises controls
in accounting systems and students have not been exposed to transactions cycles in detail, Part I
can be combined with Parts II and III. A course which emphasises design of information systems
would combine Parts I, II and IV with Part V if a database design component is required.
An introductory financial accounting course is suggested as a prerequisite and an intro-
ductory information systems course that covers software packages such as Microsoft Office
applications is helpful. If Chapter 10 (The production cycle) is to be included an introductory
management accounting course would provide a good base. The text can also be used as the main
required reference in graduate or advanced undergraduate management information systems
courses using a combination of parts depending on the course objectives and focus as described
earlier. Indeed, the topics covered in this text provide information systems students with a solid
understanding of transaction processing systems that they can then build on as they pursue more
in-depth study of specific topics such as databases, data warehouses and data mining, networks,
systems analysis and design, computer security and information system controls.
Enhancements to the first Australasian edition

The first Australasian edition of the well-used US editions of Romney and Steinbart has been
extensively revised and written to incorporate local conditions, laws, standards and cases. It has
also been rewritten to incorporate recent developments while retaining the features that have
made prior US editions easy to use but in a new structure to provide more flexibly to suit course
objectives and focus. Every chapter has been updated to include current examples of important
concepts and recent events that impact on information systems. Specific changes include:
d a theoretical foundation for AIS that underpins design, development and use of systems in
accounting—why should we have a well-designed AIS in an organisation
d more extensive coverage of both fraud and cybercrime over two chapters because of its
impact on information system, organisations and society today
d more detailed discussion of internal control frameworks: COSO, COSO-ERM and COBIT
d updated discussion of information security countermeasures, including the security and
control implications associated with virtualisation and cloud computing

xviii accounting information systems
d
additional spreadsheet exercises, based on articles, to help students develop skills, as it is
the most used software application by practitioners
d many new end-of-chapter discussion questions and problems
d incorporation of a framework to analyse ethical issues in the first chapter, with questions
for students on ethics in the context of most chapters.
Dollar amounts throughout the book are in Australian dollars unless otherwise specified.
GST/VAT amounts have not been included for simplicity.
For students
The Accounting Information Systems blog <www.pearson.com.au/romney> is an exciting and
continually updated source of case studies, news items, articles and websites of interest for
students using this text.
For lecturers
Our objective in preparing this edition has been to simplify the teaching of AISs by enabling
you to concentrate on classroom presentation and discussion, rather than on locating, assembling
and distributing teaching materials. To assist you in this process, the following supplementary
materials are available to adopters of the text:
d S olutions Manual
d PowerPoint Presentations that make extensive use of high-quality graphics to illustrate key
concepts. The slides do not merely consist of bullet points taken verbatim from the text, but
instead are designed to help students notice and understand important relationships among
concepts. The large number of slides provides instructors with a great deal of flexibility in
choosing which topics they wish to emphasise in class.
d Computerised TestBank
You can access these resources from the protected instructor area of <www.pearson.com.au>.
Acknowledgments
We wish to express our appreciation to the authors who prepared the learning and teaching
resources that accompany this text. Perhaps most important, we are indebted to Marshall B.
Romney and Paul J. Steinbart as well as the numerous faculty members throughout the world
who have adopted the earlier US editions of the book and who have been generous with their
suggestions for improvement. In writing the Australasian edition, we have received support and
encouragement from many Australian and New Zealand academics as well as from countries
around Asia on how we might contextualise this first edition. We are especially grateful to the
following academics who participated in reviewing the first edition throughout various stages of
the revision process:
Robyn Alcock, CQUniveristy
Glenn Hill, La Trobe University
Maria Italia, Victoria University
Simon Lenthen, University of Western Sydney
Dr Sumit Lodhia, University of South Australia
Alison Parkes, University of Melbourne
Graham Ray, Southern Cross University
Joan Richardson, RMIT University
Jeanette Van Akkeren, Queensland University of Technology
Zhong Zheng, The Australian National University

preface
xix
We are grateful for permission received from four professional accounting organisa-
tions to use problems and unofficial solutions from their past professional examinations in
this book. Thanks are extended to the American Institute of Certified Public Accountants for
use of the CPA Examination materials, to the Institute of Certified Management Accountants
for use of CMA Examination materials, to the Institute of Internal Auditors for use of CIA
Examination materials and to the Society of Management Accountants of Canada for use of
SMAC Examination materials. Thanks also to Microsoft for granting permission to use screen-
shots through the book.
Of course, any errors in this book remain our responsibility. We welcome your comments
and suggestions for further improvement.
We thank the great editorial team at Pearson, specifically Karen Hutchings, Judith Bamber,
Katie Pittard, Bernadette Chang and Kim Morgan. Their invaluable help, encouragement and
support kept the dream alive that was gestated some three years ago.
Finally, we want to thank our wives and families for their love, support and encourage-
ment.
We also want to thank God for giving us the ability to start and complete this book.
Marshall B. Romney
Provo, Utah, USA
Paul John Steinbart
Tempe, Arizona, USA
Joseph M. Mula
Toowoomba, Queensland, Australia
Ray McNamara
Gold Coast, Queensland, Australia
Trevor Tonkin
Melbourne, Victoria, Australia
Extracts from various AASB standards © Commonwealth of Australia. All legislation herein
is reproduced by permission but does not purport to be the official or authorised version. It
is subject to Commonwealth of Australia copyright. The Copyright Act 1968 permits certain
reproduction and publication of commonwealth legislation. In particular, s. 182A of the Act
enables a complete copy to be made by or on behalf of a particular person. For reproduction or
publication beyond that permitted by the Act, permission should be sought in writing from the
Commonwealth available from the Australian Accounting Standards Board. Requests in the first
instance should be addressed to the Administration Director, Australian Accounting Standards
Board, PO Box 204, Collions Street, West, Melbourne, Victoria, 8007.


Get
finished
Give goods
raw
materials
Finished
goods
Revenue cycle
Give Get
goods cash
Part I
Foundations of accounting
information systems
Chapter 1 Accounting information systems:
Theoretical foundation and
overview 2
Chapter 2 Fundamentals of business
processes and transaction
processing 36
Chapter 3 Systems development and
documentation techniques 62
Chapter 4 Files, database systems and
relational databases 102
Chapter 5 Control in accounting
information systems 134
Chapter 6 Accounting information system
development strategies 174
Romney_CH01.indd 1 8/8/12 11:05:30 AM

Chapter 1
Accounting information
systems: Theoretical
foundation and overview
Learning objectives
After studying this chapter, you should be able to:
1. understand the theoretical foundation to accounting
information systems (AISs)
2. distinguish data from information, discuss the characteristics of
useful information, and explain how to determine the value of
information
3. explain what decisions an organisation makes and the
information needed to make them
4. identify the information that passes between internal and
external parties and an AIS
5. describe the major business processes present in most companies
6. explain what an AIS is and describe its basic functions
7. discuss how an AIS can add value to an organisation
8. explain how an AIS and corporate strategy affect each other
9. explain the role an AIS plays in a company’s value chain
10. explain why accountants need to be knowledgeable about AISs
11. understand how ethics are important in AISs and how to analyse
an ethical issue.
INTEGRATIVE CASE S&S

After working for years as a regional manager for a retail organisation, Scott Parry
opened his own business with Susan Green, one of his district managers, as his partner.
They formed S&S to sell appliances and consumer electronics. Scott and Susan pursued
a ‘clicks and bricks’ strategy by renting a building in a busy part of town and adding an
electronic shopfront.
Romney_CH01.indd 2 8/8/12 11:05:30 AM

Get
finished
Give goods
raw
materials
Finished
goods
Revenue cycle
Give Get
goods cash
Give
raw
materi
Revenue cycle
Give G
Scott and Susan plan to invest enough money to see them through the first six goods ca
months. They will hire 15 employees within the next two weeks—three people to stock
shelves, four sales representatives, six sales assistants, and two people to develop and
maintain the electronic shopfront.
Scott and Susan will host S&S’s grand opening in five weeks. To meet that deadline,
they have to address the following issues:
1. What decisions do they need to make to be successful and profitable? For

example:
a. How should they price products to be competitive yet earn a profit?
b. Should they extend credit and, if so, on what terms? How can they accu-
rately track what customers owe and pay?
c. How should they hire, train and supervise employees? What compensation
and benefits package should they offer? How should they process the payroll?
d. How can they track cash inflows and outflows to avoid a cash squeeze?
e. What is the appropriate product mix? What inventory quantities should
they carry, given their limited showroom space?
2. What information do Scott and Susan need to make these decisions?
a. What information do external entities, such as suppliers and banks, need?
b. What information do management and other employees need?
c. How can they gather, store, and disseminate that information?
3. What business processes are needed, and how should they be carried out?
4. What functionality should be provided on the website?
5. What controls are required to secure the firm’s resources and counter agency
effects?
Although Scott and Susan could use an educated guess or ‘gut feeling’ to make
these decisions, they know they can make better decisions if they obtain additional
information. A well-designed accounting information system (AIS) can solve these
issues and provide information they need to make any remaining decisions and control
their business.
Romney_CH01.indd 3 8/8/12 11:05:32 AM

4 Part I • Foundations of Accounting Information Systems
Theoretical foundation of AISs

Information systems exist because they are an integral part of a modern organisation.
Understanding the reason for information systems and justification for their existence flows
from an understanding of why a modern organisation exists. Coase (1937) provided one answer
in his Theory of the Firm.1 His argument was relatively simple. Firms are established because it
is profitable to do so; firms organise to reduce the transaction costs of repeated and complicated
activities involved in creating, selling and distributing goods and services.
While the market system has proven both enduring and robust, there are costs in using the
price mechanism.2 A firm saves on these costs. The most obvious cost of organising production
through the price mechanism is negotiating and writing a contract every time you want a new
one. If, in our case of Scott and Susan’s retailing venture, they wished to sell clothing then to do
so without other firms’ involvement, such as selling ready-to-wear clothes, would be difficult
even prohibitive if they had to make clothes themselves.
First, they would need to purchase cotton from growers in northern New South Wales. They
would need to organise for yarn manufacturers to make the thread; weavers to make the cloth;
dyers to dye the cloth; and tailors or dressmakers to make the clothing. Setting aside designer
and transport contracts, the process of ‘making’ their own clothing while being part of every
aspect of the cost of the process would be prohibitive.
The main reason why it is profitable to establish a firm is the huge cost in doing everything
for oneself. We can see that Susan and Scott face the obvious cost of ‘organising’ production
through the price mechanism, which is the cost of what relevant prices are. They have to find
suppliers and negotiate contracts including delivery terms. This cost may be reduced but it will
not be eliminated by the emergence of specialist firms. There are specialist growers who contract
to supply seed, fertilisers, water, labour, and as suppliers or intermediaries for capital. There
are specialist yarn makers who contract with growers to provide the cotton and with labour and
capital to fabricate cloth, and so on. There are specialist clothes designers and manufacturers.
These firms reduce S&S’s costs of contracting allowing them to specialise in ‘retailing’.
It is true that contracts are not eliminated for Scott and Susan when they become a specialist
retailer but they are greatly reduced. As owners, they do not have to make a series of contracts with
resources they employ within the firm. This would be the case if they were working purely within
the price system. Every time they wished to vary an employee’s task, they would need to write a new
contract. For this series of contracts one contract is substituted. At this stage, it is important to note
the character of an employee’s contract; for example, the employee agrees, for certain remuneration
(which may be fixed or fluctuating), to obey the directions of Scott and Susan within certain limits.
The essence of the contract is that it should only state the limit to the powers of the employer.
Here we see the efficiency of the firm as an organising mechanism over the market. Indeed
some firms such as BHP-Billiton and Microsoft have larger turnovers than do many of the
world’s smaller nations. They manage huge resources, continually allocating and reallocating
these resources all outside the market system. A pertinent question to ask would be: If by organ-
ising, one can eliminate certain costs and in fact reduce the cost of production, why are there any
market transactions at all? Why isn’t all production carried out by one big firm? There are three
plausible explanations.
First, as a firm gets larger, there may be decreasing returns to the entrepreneurial function.
That is, costs of organising additional transactions within a firm may rise. Second, as a firm grows,
an entrepreneur fails to place resources in uses where their value is greatest; that is, fails to make
the best use of resources available. Finally, the supply price of one or more of production resources
may rise because ‘other advantages’ of a small firm are greater than those of a large firm. The
actual point where the expansion of a firm ceases is determined by a combination of the above
three factors. Figure 1.1 depicts these costs of organising. Note that the graph is rising; this reflects
the ‘diminishing returns to management’.3 Figure 1.1 also depicts the costs of organising through
the market mechanism. It shows the point where the loss through waste of resources is equal to the
’market costs’ of exchange transactions in the open market. This is the optimum size for a firm.
Firms compete with each other in the market for resources and customers. The efficiency
of the entrepreneurial decision-making is, in part, based on the relevance and efficiency of its
Romney_CH01.indd 4 8/8/12 11:05:32 AM

Another random document with
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¹And Rehoboam went to Shechem: for all
Israel were come to Shechem to make him
king.
1. Shechem] Chosen by Rehoboam for its central position, for it
is in the heart of Western Palestine between Mt Ebal and Mt
Gerizim.
²And it came to pass, when Jeroboam the son

of Nebat heard of it, (for he was in Egypt,
whither he had fled from the presence of king
Solomon,) that Jeroboam returned out of
Egypt. ³And they sent and called him; and
Jeroboam and all Israel came, and they spake
to Rehoboam, saying,
2. Jeroboam] For his antecedents (which are not given by the
Chronicler) see 1 Kings xi. 26 ff.
that Jeroboam returned out of Egypt] So we should read also in 1

Kings xii. 2 for “and Jeroboam dwelt in Egypt.” The difference in
Hebrew between the two readings when written without the vowels is
confined to one letter, ‫ מ‬instead of ‫ב‬.
⁴Thy father made our yoke grievous: now

therefore make thou the grievous service of
thy father, and his heavy yoke which he put
upon us, lighter, and we will serve thee. ⁵And
he said unto them, Come again unto me after
three days. And the people departed.
4. the grievous service of thy father] The “service” complained of
is described (in part) in 1 Kings v. 13, 14 (no parallel in Chronicles).
Compare viii. 9 (= 1 Kings ix. 22), note.
and we will serve thee] The people claim their ancient right to a
voice in the appointment of a king; compare 1 Samuel xi. 14, 15
(Saul) and 2 Samuel v. 1‒3 (David).
⁶And king Rehoboam took counsel with the old

men, that had stood before Solomon his father
while he yet lived, saying, What counsel give
ye me to return answer to this people?
6. stood before] Compare Deuteronomy i. 38; 1 Kings xvii. 1. The
phrase is used to express service, whether rendered to God or to
man.
⁷And they spake unto him, saying, If thou be

kind to this people, and please them, and
speak good words to them, then they will be
thy servants forever. ⁸But he forsook the
counsel of the old men which they had given
him, and took counsel with the young men that
were grown up with him, that stood before
him. ⁹And he said unto them, What counsel
give ye, that we may return answer to this
people, who have spoken to me, saying, Make
the yoke that thy father did put upon us
lighter? ¹⁰And the young men that were grown
up with him spake unto him, saying, Thus
shalt thou say unto the people that spake unto
thee, saying, Thy father made our yoke heavy,
but make thou it lighter unto us; thus shalt
thou say unto them, My little finger is thicker
than my father’s loins.
7. If thou be kind to this people, and please them] The Chronicler
has softened the forcible words of the parallel passage (1 Kings xii.
7), “If thou wilt be a servant unto this people this day, and wilt serve
them.” The words which were too blunt for Rehoboam were also too
blunt for the Chronicler.
¹¹And now whereas my father did lade you

with a heavy yoke, I will add to your yoke: my
father chastised you with whips, but I will
chastise you with scorpions. ¹²So Jeroboam
and all the people came to Rehoboam the
third day, as the king bade, saying, Come to
me again the third day.
11. with whips] A whip or flail was among the insignia of an
Egyptian (and perhaps also of an Israelite) king. Compare Erman,
Ancient Egypt, English Translation p. 60 (where an illustration is
given) and p. 63.
with scorpions] The expression may be proverbial and

metaphorical, but some authorities (e.g. Peshitṭa) take “scorpion” to
be the name of a particular kind of scourge, the lash of which was
provided with thorns or hooks.
¹³And the king answered them roughly; and

king Rehoboam forsook the counsel of the old
men, and spake to them after the counsel of
the young men, saying, My father made your
yoke heavy, but I will add thereto: my father
chastised you with whips, but I will chastise
you with scorpions.
13. answered them roughly] It was difficult for the son of so
powerful a king as Solomon to realise that there was any necessity
for a soft answer. Solomon had put down Israelite discontent by
driving Jeroboam into exile in Egypt, and David had put down
somewhat easily the movement under Sheba son of Bichri (2
Samuel xx. 1‒22). Could the good fortune of the house of David fail
at this third crisis?
¹⁵So the king hearkened not unto the people;

for it was brought about of God, that the Lord
might establish his word, which he spake by
the hand of Ahijah the Shilonite to Jeroboam
the son of Nebat.
15. Ahijah] Compare 1 Kings xi. 29‒39. The incident referred to is
not narrated in Chronicles, being assumed to be known.
16‒19 (= 1 Kings xii. 16‒19).

The Revolt.
¹⁶And when all Israel saw that the king

hearkened not unto them, the people
answered the king, saying, What portion have
we in David? neither have we inheritance in
the son of Jesse: every man to your tents, O
Israel: now see to thine own house, David. So
all Israel departed unto their tents.
16. What portion have we in David ... the son of Jesse] The same
protest was voiced by Sheba in his brief rebellion against David (1
Samuel xx. 1). Contrast the language of the ten tribes after the
collapse of Absalom’s rebellion: We have ten parts in the king (2
Samuel xix. 43).
to your tents] See note on vii. 10.
¹⁷But as for the children of Israel that dwelt in

the cities of Judah, Rehoboam reigned over
them.
17. The order is much improved if this verse be read after verse
19.
¹⁸Then king Rehoboam sent Hadoram, who

was over the levy; and the children of Israel
stoned him with stones, that he died. And king
Rehoboam made speed to get him up to his
chariot, to flee to Jerusalem. ¹⁹So Israel
rebelled against the house of David, unto this
day.
18. Hadoram] Called “Adoram” in the parallel passage (1 Kings
xii. 18) and “Adoniram” (1 Kings iv. 6, v. 14 [28, Hebrew]).
Chapter XI.
1‒4 (= 1 Kings xii. 21‒24).
Shemaiah forbids Civil War.
The Chronicler here omits the elevation of Jeroboam to be king

over Israel (1 Kings xii. 20).
¹And when Rehoboam was come to

Jerusalem, he assembled the house of Judah
and Benjamin, an hundred and fourscore
thousand chosen men, which were warriors, to
fight against Israel, to bring the kingdom again
to Rehoboam.
1. an hundred and fourscore thousand] The number is small
compared with the Judean armies mentioned in xiii. 3, xiv. 7, xvii. 14;
yet it is far greater than is credible. The word rendered thousand
may originally have been used to denote a tribal division, thus
including women and children and old men. If so, the actual warriors
represented by 180 such “thousands” would be about 30,000, a very
large number for so small a state, yet not impossible. But, however
that may be for the early days, there is little or no doubt that the
Chronicler understood the word in its strict sense: a literal thousand.
See the note on xvii. 14.
²But the word of the Lord came to Shemaiah

the man of God, saying,
2. Shemaiah] See xii. 5, 15.
³Speak unto Rehoboam the son of Solomon,
king of Judah, and to all Israel in Judah and
Benjamin, saying, ⁴Thus saith the Lord, Ye
shall not go up, nor fight against your
brethren: return every man to his house; for
this thing is of me. So they hearkened unto the
words of the Lord, and returned from going
against Jeroboam.
3. to all Israel in Judah and Benjamin] The Chronicler does not
hesitate to use the term “Israel” in speaking of Judah. Thus the
princes of the Southern Kingdom are called “the princes of Israel”
(xii. 6, xxi. 4), the populace as a whole is called “Israel” (xii. 1, xv.
17), Jehoshaphat and Ahaz are each called “king of Israel” (xxi. 2,
xxviii. 19), and the sepulchres of the kings at Jerusalem are called
the “sepulchres of the kings of Israel” (xxviii. 27). Israel in Chronicles
then = the covenant-people. In Kings, on the contrary, Israel
generally means the Northern Kingdom.
5‒23.
The Prosperity of Rehoboam.
These verses have no corresponding section in 1 Kings On the

other hand, the Chronicler omits three important sections of 1 Kings,
viz. xii. 25‒33 (the setting up of the golden calves), xiii. 1‒32 (the
episode of the prophet who cried against the altar in Beth-el) and xiv.
1‒18 (the death of the son of Jeroboam).
⁵And Rehoboam dwelt in Jerusalem, and built

cities for defence in Judah.
5. built cities for defence] This does not mean that all these cities
were then built for the first time; certainly Beth-lehem, Tekoa, and
Hebron were ancient places. Rebuilding, strengthening, and
fortifying are included in the meaning of the Hebrew verb bānāh =
build. The cities mentioned were situated some in the hill country of
Judah, some in the Shephelah. It is probable that they were
strengthened as a measure of defence against Egypt. Less likely is
the suggestion that they were fortified chiefly to prevent or suppress
insurrection against Rehoboam in Judah. See also Introduction § 7,
p. xlviii.
⁶He built even Beth-lehem, and Etam, and

Tekoa,
6. Etam] Probably represented by some ruins a little to the south-
west of Beth-lehem, by which is a spring called Ain ‘Atān. Compare 1
Chronicles iv. 3. Bädeker, Palestine⁵, p. 109.
⁷and Beth-zur, and Soco, and Adullam,

7. Beth-zur] Represented by the ruin Burj Ṣūr to the north of
Hebron. Compare Joshua xv. 58. Bädeker, Palestine⁵, p. 112.
Soco] The cities hitherto mentioned were situated in the hill

country, but the position of the Soco here mentioned and Adullam is
uncertain. Two places bore the name Soco or Socoh, one situated in
the Shephelah (Joshua xv. 35; 1 Samuel xvii. 1, Revised Version),
and one in the hill country (“the mountains,” Joshua xv. 48)—see
note 1 Chronicles iv. 18. For Adullam compare Joshua xv. 35; 1
Chronicles xi. 15 (note on the cave of Adullam).
⁸and Gath, and Mareshah, and Ziph,

8. Gath] compare 1 Chronicles xviii. 1.
Mareshah] In the Shephelah south of the modern Beit Jibrin.

Compare xiv. 9, xx. 37.
Ziph] Probably Tell Zif south of Hebron.

⁹and Adoraim, and Lachish, and Azekah,
9. Adoraim] The modern Dora west of Hebron.
Azekah] In the Shephelah, mentioned along with Socoh in

Joshua xv. 35.
¹⁰and Zorah, and Aijalon, and Hebron, which

are in Judah and in Benjamin, fenced cities.
¹¹And he fortified the strong holds, and put
captains in them, and store of victual, and oil
and wine.
10. Zorah] Joshua xv. 33 (Revised Version). It was situated in the
Shephelah.
Aijalon] The modern Yalo, a little north of the Jaffa road about
midway between Ramleh and Jerusalem. It is an ancient place
mentioned in the Tell el-Amarna letters. Compare xxviii. 18 and 1
Chronicles vi. 69; also Smith, Historical Geography of the Holy Land
pp. 210‒213.
and in Benjamin] None of the fifteen cities seems to have been in

Benjamin. Zorah and Aijalon were in Dan (Joshua xix. 41, 42,
Revised Version), while the remaining thirteen were in Judah.
Compare verse 5.
Benjamin, in reality, belonged to the Northern Kingdom until, after

the fall of Samaria, its territory was included in the Judean kingdom
(see 1 Kings xii. 20). Later, the idea prevailed that it had been one
with the Southern Kingdom from the beginning—as appears here,
and apparently in 1 Kings xi. 31. At any rate the phrase, Judah and
Benjamin, came to be used as a general expression denoting the
Southern Kingdom. How long any sense of its partial inaccuracy
remained is uncertain.
¹²And in every several city he put shields and
spears, and made them exceeding strong.
And Judah and Benjamin belonged to him.
12. And Judah and Benjamin belonged to him] If the view,
discussed in the note on verse 5, that Rehoboam’s military
precautions were carried through to suppress or prevent rebellion in
Judah, then this phrase should be rendered And so Judah and
Benjamin became his.
¹³And the priests and the Levites that were in

all Israel resorted to him out of all their border.
13. resorted to him] Literally took their stand by him.
¹⁴For the Levites left their suburbs and their

possession, and came to Judah and
Jerusalem: for Jeroboam and his sons cast
them off, that they should not execute the
priest’s office unto the Lord:
14. suburbs] See note on 1 Chronicles v. 16.
cast them off, that they should not execute the priest’s office unto
the Lord] The point is in the concluding words “unto the Lord” (i.e.
Jehovah). Jeroboam did not abandon the worship of Jehovah,
although later generations thought so and could not conceive that
the famous “calves wherewith he made Israel to sin” were images
symbolic of Jehovah. The Chronicler regards him as having lapsed
into gross idolatry (see verse 15) and as having ejected all the
Levites from his kingdom. A less stringent opinion as to his treatment
of the priests of Jehovah is expressed in 1 Kings xii. 31, xiii. 33
where it is not said that Jeroboam rejected the tribe of Levi, but only
that he allowed men of any tribe to become priests; “he ... made
priests from among all the people” (Revised Version). Comparison of
Kings and Chronicles is here very valuable as an illustration of the
care with which the history in Chronicles has been adapted to
indicate that the Northern Kingdom was wholly wicked and apostate
from the start. The Chronicler’s hostility to the North is really directed
against the Samaritans: see Introduction § 6.
¹⁵and he appointed him priests for the high

places, and for the he-goats ¹, and for the
calves which he had made. ¹⁶And after them,
out of all the tribes of Israel, such as set their
hearts to seek the Lord, the God of Israel,
came to Jerusalem to sacrifice unto the Lord,
the God of their fathers.
¹ Or, satyrs See Leviticus xvii. 7.
15. the he-goats] The heathen Arabs believed in the existence of

demons (called jinn) having various animal forms and inhabiting
deserted places, and this belief was shared by the Hebrews
(compare Isaiah xiii. 21). In this verse and in Leviticus xvii. 7, the
writers seem to identify the gods worshipped by the heathen with
these demons. (Compare W. R. Smith, Religion of the Semites², pp.
120 ff.)
the calves] Not previously mentioned in Chronicles; 1 Kings xii.

28.
¹⁷So they strengthened the kingdom of Judah,

and made Rehoboam the son of Solomon
strong, three years: for they walked three
years in the way of David and Solomon.
17. three years] There were three years of prosperity, in the
fourth year Judah fell away into idolatry, and in the fifth year
chastisement overtook them by the hand of Shishak (xii. 1‒3). For
the significance of this, see the note on xii. 14.
of David and Solomon] The Chronicler here as elsewhere ignores

the fall of Solomon. In 1 Kings xi. 4‒6 an express distinction is made
between the way of David and the way of Solomon.
¹⁸And Rehoboam took him a wife, Mahalath

the daughter of Jerimoth the son of David, and
of Abihail ¹ the daughter of Eliab the son of
Jesse; ¹⁹and she bare him sons; Jeush, and
Shemariah, and Zaham.
¹ Or, and Abihail.
18. Jerimoth] Nothing is known regarding a son of David of this

name. He may have been the son of a concubine (1 Chronicles iii.
9).
and of Abihail] i.e. Mahalath’s father was Jerimoth, her mother

Abihail. The Authorized Version “and Abihail” wrongly implies that
Abihail was, like Mahalath, a wife of Rehoboam.
Eliab] David’s eldest brother; 1 Samuel xvi. 6, xvii. 13.
²⁰And after her he took Maacah ¹ the daughter

of Absalom; and she bare him Abijah, and
Attai, and Ziza, and Shelomith. ²¹And
Rehoboam loved Maacah the daughter of
Absalom above all his wives and his
concubines: (for he took eighteen wives, and
threescore concubines, and begat twenty and
eight sons and threescore daughters.) ²²And
Rehoboam appointed Abijah the son of
Maacah to be chief, even the prince among
his brethren: for he was minded to make him
king.
¹ In chapter xiii. 2, Micaiah the daughter of Uriel.
20. Maacah] Perhaps the grand-daughter of Absalom, since she

is called the daughter of Uriel of Gibeah in xiii. 2 (where, with LXX.,
read “Maacah” for “Michaiah”; and see the note there). According to
2 Samuel xviii. 18 Absalom had “no son to keep his name in
remembrance” but he may have had a daughter who married Uriel
and became the mother of this Maacah; and further in 2 Samuel xiv.
27 it is said that Absalom had three sons and a daughter named
Tamar. These sons may all have died young, but perhaps xiv. 27 is
another tradition differing from xviii. 18.
Abijah] Called “Abijam” 1 Kings xv. 1.
²³And he dealt wisely, and dispersed of all his

sons throughout all the lands of Judah and
Benjamin, unto every fenced city: and he gave
them victual in abundance. And he sought for
them many wives ¹.
¹ Or, sought a multitude of wives.
23. all the lands] i.e. the territory of Judah; compare 1 Chronicles
xiii. 2 (margin).
And he sought for them many wives] More exactly, as margin,
And he sought a multitude of wives. It is difficult to say whether or
not the Chronicler has Deuteronomy xvii. 17 in his mind and is
implicitly blaming the king. In any case he goes on in the next verse
to say that Rehoboam forsook the law of the Lord. It is however
probable that there is a slight error in the Hebrew and that the text
ran originally thus, And he took for them (i.e. for his sons) a multitude
of wives. Rehoboam’s own conjugal affairs have been already
described in verse 21.
Chapter XII.
1‒12 (compare 1 Kings xiv. 22, 25‒28).
The Invasion of Shishak.
¹And it came to pass, when the kingdom of

Rehoboam was established, and he was
strong, that he forsook the law of the Lord,
and all Israel with him.
1. all Israel] i.e. all the Southern Kingdom; compare note on xi. 3.
The details of Judah’s apostasy are given in 1 Kings xiv. 22‒24.
²And it came to pass in the fifth year of king

Rehoboam, that Shishak king of Egypt came
up against Jerusalem, because they had
trespassed against the Lord,
2. Shishak] The Egyptian king has commemorated this expedition
in a pictorial inscription on the wall of the temple of Karnak. It
appears that the Northern Kingdom suffered as well as the Southern;
much spoil was carried off, but no permanent conquest of Canaan
was attempted. (Breasted, History of Egypt, pp. 529 f.)
because they had trespassed] A touch characteristic of the

Chronicler; compare xiii. 18, xxi. 10, xxiv. 24, xxv. 20, xxvii. 6, xxviii.
19; and 1 Chronicles x. 13, 14. The Chronicler sees the working of
temporal rewards and of temporal punishments everywhere.
³with twelve hundred chariots, and threescore

thousand horsemen: and the people were
without number that came with him out of
Egypt; the Lubim, the Sukkiim, and the
Ethiopians.
3. with twelve hundred chariots] The details given in this verse
are absent from 1 Kings.
Lubim] i.e. the Libyans of North Africa. Shishak was a leader of

Libyan mercenaries. He made himself master of Egypt circa 950
b.c., and is known as the founder of the xxiind dynasty.
Sukkiim] LXX. Τρωγλοδύται, i.e. the cave dwellers of the

mountains which fringe the west coast of the Red Sea. But whether
these are really meant here is doubtful.
⁴And he took the fenced cities which pertained

to Judah, and came unto Jerusalem.
4. the fenced cities] Compare xi. 5.
⁵Now Shemaiah the prophet came to

Rehoboam, and to the princes of Judah, that
were gathered together to Jerusalem because
of Shishak, and said unto them, Thus saith the
Lord, Ye have forsaken me, therefore have I
also left you in the hand of Shishak.
5. Now Shemaiah the prophet came] This intervention of
Shemaiah is not mentioned in 1 Kings For an earlier appearance of
the prophet see xi. 2 ff. = 1 Kings xii. 22 ff.
have I also left you in the hand] Rather, I also have forsaken
you and delivered you into the hand.
⁶Then the princes of Israel and the king

humbled themselves; and they said, The
Lord is righteous.
6. princes of Israel] Called “princes of Judah” in verse 5; compare
note on xi. 3.
humbled themselves] i.e. they fasted and put on sackcloth;

compare 1 Kings xxi. 27, 29.
The Lord is righteous] Compare Pharaoh’s confession (Exodus

ix. 27), and the Psalmist’s address to God, “That thou mayest be
justified (literally ‘mayest be righteous’) when thou speakest, and be
clear when thou judgest” (Psalms li. 4). The “righteousness” of God
is made known to man in His judgement, whether the judgement be
of condemnation (as here) or of acquittal (as 1 John i. 9, Revised
Version).
⁷And when the Lord saw that they humbled

themselves, the word of the Lord came to
Shemaiah, saying, They have humbled
themselves; I will not destroy them: but I will
grant them some deliverance ¹, and my wrath
shall not be poured out upon Jerusalem by the
hand of Shishak.
¹ Or, deliverance within a little while Or, a few that shall escape.
7. some deliverance] Render, as margin, deliverance within a

little while.
⁸Nevertheless they shall be his servants; that

they may know my service, and the service of
the kingdoms of the countries.
8. that they may know my service, etc.] i.e. that they may learn
the difference between my service and other service.
⁹So Shishak king of Egypt came up against

Jerusalem, and took away the treasures of the
house of the Lord, and the treasures of the
king’s house; he took all away: he took away
also the shields of gold which Solomon had
made.
9. he took all away] Shishak was bought off with a heavy present
from attacking Jerusalem; compare the case of Sennacherib (2
Kings xviii. 13‒16).
shields] Rather, targets, i.e. small shields; compare note on ix.

15.
¹⁰And king Rehoboam made in their stead

shields of brass, and committed them to the
hands of the captains of the guard ¹, that kept
the door of the king’s house. ¹¹And it was so,
that as oft as the king entered into the house
of the Lord, the guard came and bare them,
and brought them back into the guard
chamber.
¹ Hebrew runners.
10. the guard] margin (more literally) the runners. These derived
their name from the duty of running before the king’s chariot to clear
the way for him; compare 2 Samuel xv. 1; 1 Kings i. 5.
¹²And when he humbled himself, the wrath of

the Lord turned from him, that he would not
destroy him altogether: and moreover in
Judah there were good things found.
12. in Judah were good things found] i.e. piety, compare xix. 3.
This is said as giving an additional reason for the mercy which God
had showed (verse 7). Doubtless it is also intended to emphasise the
religious superiority of the South over the North; compare the note
on xi. 20.
13‒16 (compare 1 Kings xiv. 21, 29‒31).

Summary of Rehoboam’s Reign.
¹³So king Rehoboam strengthened himself in

Jerusalem, and reigned: for Rehoboam was
forty and one years old when he began to
reign, and he reigned seventeen years in
Jerusalem, the city which the Lord had
chosen out of all the tribes of Israel, to put his
name there: and his mother’s name was
Naamah the Ammonitess.
13. strengthened himself] See note on i. 1. The immediate
reference is to a recovery of strength after the departure of Shishak;
the further reference is to xi. 5.
forty and one years old ... and he reigned seventeen years] So
read both the Hebrew and LXX. here and in 1 Kings xiv. 21, but in
the additional passage which follows 1 Kings xii. 24 in LXX. (B, not
A) we read, sixteen years old ... and twelve years he reigned. No
importance however can be attached to this variation, for the
passage which contains it is plainly midrashic in character.
the city which the Lord had chosen] Though the Ten Tribes were
lost to the house of David, the Lord kept his oath to David by
securing to his seed the possession of the one holy city of Israel.
¹⁴And he did that which was evil, because he

set not his heart to seek the Lord.
14. he set not his heart] The phrase implies steady purpose. The
Chronicler concludes that Rehoboam must be classed as a king who
was good but not entirely so. The considerations which chiefly
influenced him in determining the character of this reign were
perhaps two: on the one hand the invasion of Shishak was felt to be
a fixed point, a disaster only to be accounted for in the Chronicler’s
view by some falling away from assiduous worship of Jehovah; and
on the other hand it seemed incredible that the second direct
descendant of David on the throne of Israel should have been
seriously corrupt. The situation was met by representing Rehoboam
as having been three years faithful (and therefore prosperous), and
one year faithless (and therefore assailed by Shishak in the fifth
year). The favourable aspect of his reign was further emphasised by
the statement of verse 16, and by the suppression of the three
damaging passages in Kings, referred to in the head-note to xi. 5‒
23. It is very obvious that the resultant picture of the king is much
less true to historical reality than the account in Kings; but it serves
excellently to illustrate the Chronicler’s contention that virtue
prospers and vice is punished. And once more we may insist that the
value of this writer for us lies supremely in the energy and the
conviction with which he seeks to drive home this great moral and
spiritual belief.
¹⁵Now the acts of Rehoboam, first and last,

are they not written in the histories ¹ of
Shemaiah the prophet and of Iddo the seer,
after the manner of genealogies ²? And there
were wars between Rehoboam and Jeroboam
continually. ¹⁶And Rehoboam slept with his
fathers, and was buried in the city of David:
and Abijah his son reigned in his stead.
¹ Hebrew words. ² Or, in reckoning the genealogies.
15. in the histories of ...] See Introduction § 5.
Iddo] compare xiii. 22, and see note on ix. 29.
after the manner of genealogies] margin in reckoning the

genealogies; but literally “to enrol themselves.” This most obscure
phrase is perhaps a meaningless fragment due to textual corruption.
Another suggestion is that it has been misplaced and should be read
at the end of xi. 16.

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(eBook PDF) Accounting Information

Systems Australasian edition

This adaptation of Accounting Information Systems has been

This text offers coverage of important concepts such as systems,

ACC INFO SYSTEMS FINAL.indd 1 30/7/12 3:13:43 PM

Problems 80 Commitment to integrity, ethical values and

Romney_prelims.indd 7 26/7/12 9:40:52 AM

Prototyping 187 Ordering materials, supplies and

Summary and case conclusion 190 Receiving 249

Romney_prelims.indd 8 26/7/12 9:40:53 AM

Cost accounting 298 Accounting information system

Discussion questions 306 Preventing and detecting fraud and

Theories underpinning fraud and Understanding targeted attacks 425

Romney_prelims.indd 9 26/7/12 9:40:53 AM

Physical access controls 429 Problems 474

Romney_prelims.indd 10 26/7/12 9:40:54 AM

Production cycle: Threats and controls 542 Systems development 611

Romney_prelims.indd 11 26/7/12 9:40:55 AM

Introduction 705 Combined HRM/payroll data model 739

Romney_prelims.indd 12 26/7/12 9:40:55 AM

Romney_prelims.indd 13 26/7/12 9:40:56 AM

Key learning objectives

Features to facilitate learning

Romney_prelims.indd 14 26/7/12 9:40:56 AM

Romney_prelims.indd 15 26/7/12 9:40:57 AM

Comparative table of contents for users of US editions

Romney_prelims.indd 16 26/7/12 9:40:58 AM

16 10 8 Information systems controls for system reliability—Part 3:

Enhancements to the first Australasian edition

Romney_prelims.indd 17 26/7/12 9:40:59 AM

Romney_prelims.indd 18 26/7/12 9:40:59 AM

Romney_prelims.indd 19 26/7/12 9:41:00 AM

Romney_prelims.indd 20 26/7/12 9:41:00 AM

Romney_CH01.indd 1 8/8/12 11:05:30 AM

INTEGRATIVE CASE S&S

Romney_CH01.indd 2 8/8/12 11:05:30 AM

1. What decisions do they need to make to be successful and profitable? For

Romney_CH01.indd 3 8/8/12 11:05:32 AM

Theoretical foundation of AISs

Romney_CH01.indd 4 8/8/12 11:05:32 AM

²And it came to pass, when Jeroboam the son

that Jeroboam returned out of Egypt] So we should read also in 1

⁴Thy father made our yoke grievous: now

⁶And king Rehoboam took counsel with the old

⁷And they spake unto him, saying, If thou be

¹¹And now whereas my father did lade you

with scorpions] The expression may be proverbial and

¹³And the king answered them roughly; and

¹⁵So the king hearkened not unto the people;

16‒19 (= 1 Kings xii. 16‒19).

¹⁶And when all Israel saw that the king

to your tents] See note on vii. 10.

¹⁷But as for the children of Israel that dwelt in

¹⁸Then king Rehoboam sent Hadoram, who

The Chronicler here omits the elevation of Jeroboam to be king

¹And when Rehoboam was come to

²But the word of the Lord came to Shemaiah

Problems 80 Commitment to integrity, ethical values and

Prototyping 187 Ordering materials, supplies and

Summary and case conclusion 190 Receiving 249

Cost accounting 298 Accounting information system

Discussion questions 306 Preventing and detecting fraud and

Theories underpinning fraud and Understanding targeted attacks 425

Physical access controls 429 Problems 474

Production cycle: Threats and controls 542 Systems development 611

Introduction 705 Combined HRM/payroll data model 739