Professional Documents
Culture Documents
AIS6e.ab - Az Ch01
AIS6e.ab - Az Ch01
Information
Requirements
Each user group has unique information requirements.
The higher the level of the organization, the greater
the need for more aggregated information and less
need for detail.
Information in Business
Information is a business
resource that:
needs to be appropriately
managed
is vital to the survival of
contemporary businesses
Internal users
3.Internal auditors
They use the information that enables to access
operational and internal controls .
4 employees
They use the information in order to carryout their
daily duties.
External users
Tax accountants must understand the
clients AIS adequately to be confident that
it is providing complete and accurate
information for tax planning and compliance
work.
Potential investors
They want information that will enable them to
access the feasibility of investing their funds in a
particular entity or to withdraw their funds and
invest it else where. Information can be obtained
from the SOFP, SOCI and SOCE
External users
Creditors
They want to access the ability of the company to
settle its debts.
Debtors
They are mainly concerned about the going
concern of a company
This will assure them if the company is able to
supply them with raw materials in the
future(continued business).
What is a System?
A group of 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.
CHARACTERISTICS OF A SYSTEM
CONTINUE
Process.
This is whereby the component parts co-ordinate in a
defined way. Process refers to the manner in which
each components function with other components of
the system.
For example, in a computer system the CPU must
interact with the input device to solve a problem, in
turn the main memory holds the program and data
that the arithmetic unit uses for computation.
This means that the parts of the system depend on
each other and they are coordinate and linked
together according to plan.
CHARACTERISTICS OF A SYSTEM
CONTINUED
Goal
These are the objectives which the
components parts are coordinated. The
objectives may be real or stated. In most
organizations, they state an objective and
operate to achieve it.
Sub-system.
A subsystem is a system that exists in another
system; its existence depends upon the
existence of a super system. A sub system
contributes to the proper working of the entire
system
For example, an auto mobile system consists of
many sub-systems like acceleration system,
fuel injection system and the braking system.
Every sub-system is responsible for the proper
functioning of the entire auto mobile system.
Super system
A super system is a system responsible for
monitoring the overall working of its subsystems therefore it contains many subsystems. It decides the constraints and
resources to be put on its sub-systems.
For example; the central government system
which has the state government under its
control which form the sub-system.
2.
3. Enables
System Decomposition
versus System
System Decomposition
Interdependency
the process of dividing the system into smaller
subsystem parts
System Interdependency
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
Boundaries
A boundary is anything marking a limit that
separate the internal components of a system
from external entities. Boundaries can be
classified in to two, permeable and
impermeable boundaries.
Boundaries
Permeable boundaries allow a certain
degree of interactions between the system
and its environment for example relatively
closed system.
Impermeable boundaries do not allow
interactions between the system and its
environment for example closed systems.
Interfaces
An interface is a shared boundary or
connection between two similar systems
through which information is passed; the
information can be either physical or
logical.
Characteristics of a
system
Timely information
Chose a processing method suitable to users
needs. For example use of online processing
method as it processes transactions at the
moment the event occurs
User satisfaction
Satisfy
the
organizations
a)current
Getting steering committee approval for new
needs
system development
b)future
Have a long range system master plan this
governs the objectives of the organization.
Adopt to technological
changes
Different types of
systems
Closed System
Relatively Closed system
Open System
Feedback control system
TYPES OF SYSTEMS
CLOSED SYSTEM
is a system that does not interact with the
environment
There are no interfaces.
Has no effects on the outside of its boundaries
and the environment has no effects on the
process within the system. For example, a watch.
CLOSED SYSTEM
It is a system which maintains itself on a limited
amount of resources that are firmly established in
that particular system hence being difficult to
change it.
Such a system is a theoretical concept rather than
being a practical concept.
CLOSED SYSTEM
EXAMPLE
Certain departments within an organisation can
be set up as closed system.
A research and development (R&D) department
within a computer organisation may be set up as
a closed system with no interaction outside the
division.
The purpose is to protect trade secretes and
invention that are being produced inside.
CLOSED SYSTEMS
ADVANTAGES
There are no disturbances in the system.
It is highly effective and efficient.
CLOSED SYSTEMS
LIMITATIONS
Can hamper growth since the flow of information
stays within the system.
Has no chance to interact with or build on
knowledge from the outer world.
It does not adapt to technological changes.
It practically does not exist because it lacks the
need for interaction.
RELATIVELY CLOSED
SYSTEM
RELATIVELY CLOSED
SYSTEM
RELATIVELY CLOSED
SYSTEMS
DISADVANTAGES
It is not reliable for it is prone to disturbances
from the environment
OPEN SYSTEM
Is one in which the systems interaction with the
environment is not controlled.
Has many interfaces with its environment ,that
is ,system that interacts freely with its
environment, taking input and returning output.
Contains subsystems which help in converting
input into output.
OPEN SYSTEM
It permits interactions across its boundary , it
receives inputs from and delivers outputs to the
outside.
System designers anticipate the things that can
go wrong in the environment and create
processes and interfaces to control them.
For example, media and internet.
DISADVANTAGES
The system has disturbances of uncontrolled
inputs that affect the processed resources within
the system.
FEEDBACK CONTROLLED
SYSTEM
A portion of the system is retained as an input to
the system.
For example, in accounting system ,revenue
output by other goods can be used as capital in
costing and variances can be output that can be
used in decision making.
Designed to provide feedback
Uses interfaces to permeate information bottom
up and top down.
FEEDBACK CONTROLLED
SYSTEM
Uses the function of a prescribed relationship
between the output and reference input to control
the process of resources in that system.
The difference between the output of the process
under control and the reference input is amplified
and used to control the process so that the
difference is continuously reduced
ADVANTAGES
Can be used for decision making.
Provide the feedback which help the system to
obtain its goals and enhance employee
motivation.
Provide management with meaningful information
on how effective its planning effort was.
The effect of unwanted disturbances can be
effectively reduced.
DISADVANTAGES
The time the manager may get the information ,
the damage might already have been done thus
making feedback irrelevant
It is expensive to set up and the cost of feedback
is first manifested in the increased number of
components and the complexity of the system.
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.
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 organizations
information system
e.g., an airline reservation no commitment by the
customer
Transactions
Financial
Transactions
Nonfinancial
Transactions
Information
System
Information
User
Decision
Making
What is Accounting
Information Systems?
Accounting is an information system.
MIS
is concerned about
day to day running
of the business with
subsystems such as
Transaction
Processing System
(TPS).
MIS
records financial
transactions which
are economic events
that affect assets and
equities of a firm and
is measured in
monetary terms for
instance sale of
goods to customers
cash movements etc.
provides
information for
internal and
external use.
MIS
MIS principally
provides
information to
internal parties.
MIS
MIS
supports stewardship
management with
information contained
in the financial
statements and
responsibility report.
Information is about
how resources are
utilised and
safeguarded.
MIS is used as a
yardstick for
measuring
performance.
Managers make
future projections
and hence actual
results are
compared with the
projections made.
MIS
provide information
that conforms to
Generally Accepted
Accounting
Principles (GAAP).
Albright (2006)
goes on to say it is
produced in a
variety of formats
that meet the
particular
information needs
of a companys
managers.
AIS Subsystems
Transaction processing system
(TPS)
supports daily business operations
Data Sources
Data sources are financial transactions
that enter the information system from
internal and external sources.
External financial transactions are the most common source
of data for most organizations.
E.g., sale of goods and services, purchase of inventory,
receipt of cash, and disbursement of cash (including
payroll).
Internal financial transactions involve the exchange or
movement of resources within the organization.
E.g., movement of raw materials into work-in-process
(WIP), application of labor and overhead to WIP, transfer
of WIP into finished goods inventory, and depreciation of
equipment.
1. Data Collection
Capturing transaction data
Recording data onto forms
Validating and editing the data
2. Data Processing
Classifying
Transcribing
Sorting
Batching
Merging
Calculating
Summarizing
Comparing
3. Data Management
Storing
Retrieving
Deleting
4. Information Generation
Compiling
Arranging
Formatting
Presenting
Characteristics of Useful
Information
Regardless of physical form or technology,
useful information has the following
characteristics:
Relevance: serves a purpose
Timeliness: no older than the time period of the action it
supports
Accuracy: free from material errors
Completeness: all information essential to a decision or
task is present
Summarization: aggregated in accordance with the
users needs
Organizational Structure
The structure of an organization helps to allocate
responsibility
authority
accountability
Functional Areas
Inventory/Materials Management
purchasing, receiving and stores
Production
production planning, quality control, and maintenance
Marketing
Distribution
Personnel
Finance
Accounting
Computer Services
Accounting Independence
Information reliability requires
accounting independence.
Accounting activities must be separate and
independent of the functional areas maintaining
resources.
Accounting supports these functions with
information but does not actively participate.
Decisions makers in these functions require that
such vital information be supplied by an
independent source to ensure its integrity.
Distributed Data
Processing
Reorganizing the
computer services
function into small
information processing
units that are distributed
to end users and
placed under their control
Centralized Data
Processing
All data processing
is performed by
one or more large
computers housed
at a central site
that serves users
throughout the
organization.
Primary areas:
database administration
data processing
systems development
systems maintenance
Potential Disadvantages of
DDP
Loss of control
Data Redundancy
Problems
Data Storage - excessive storage costs of
E
M
Line items
Sales
M
M
Party to
Sales
person
M
1
Pays for
Made to
Customer
1
Cash
Increases
Cash
Collections M
Received
from
Received
by
Cashier
34
REA Model
The REA model is an accounting
framework for modeling an
organizations
economic resources; e.g., assets
economic events; i.e., affect changes in resources
economic agents; i.e., individuals and departments that
participate in an economic event
Interrelationships among resources, events and agents
Accountants as Information
System Users
Accountants must be able to clearly convey their
needs to the systems professionals who design the
system.
The accountant should actively participate in systems
development projects to ensure appropriate systems
design.
Accountants as System
Designers
The accounting function is responsible for the
conceptual system, while the computer function is
responsible for the physical system.
The conceptual system determines the nature of the
information required, its sources, its destination, and
the accounting rules that must be applied.
Accountants as System
Auditors
External Auditors
attest to fairness of financial statements
assurance service: broader in scope than
traditional attestation audit
IT Auditors
evaluate IT, often as part of external audit
Internal Auditors
in-house IS and IT appraisal services