Chapter

13-1
 Data and
Databases
Chapter
13-2 Accounting Information Systems, 1st Edition
 Study
Study Objectives
Objectives
1. The need for data collection and storage
2. Methods of storing data and the interrelationship between storage
and processing
3. The differences between batch processing and real-time processing
4. The importance of databases and the historical progression from flat-
file databases to relational databases
5. The need for normalization of data in a relational database
6. Data warehouse and the use of a data warehouse to analyze data
7. The use of OLAP and data mining as analysis tools
8. Distributed databases and advantages of the use of distributed data
9. Controls for Data and Databases
10. Ethical issues related to data collection and storage, and their use in
IT systems
Chapter
13-3
 The
The Need
Need for
for Data
Data Collection
Collection and
and Storage
Storage

Data are the set of facts collected from transactions,

whereas information is the interpretation of data that
have been processed.

Main reasons to store transaction data:

1. To complete transactions from beginning to end.

2. To follow up with customers or vendors and to expedite

future transactions.

3. To create accounting reports and financial statements.

4. To provide feedback to management.

Chapter
13-4 SO 1 The need for data collection and storage
 The
The Need
Need for
for Data
Data Collection
Collection and
and Storage
Storage

Typical storage and processing techniques:

1. The storage media types for data: sequential and

random access

2. Methods of processing data: batch and real time

3. Databases and relational databases

4. Data warehouses, data mining, and OLAP

5. Distributed data processing and distributed

databases

Chapter
13-5 SO 1 The need for data collection and storage
 The
The Need
Need for
for Data
Data Collection
Collection and
and Storage
Storage

Concept Check
Which of the following best describes the relationship
between data and information?

a. Data is interpreted information.

b. Information is interpreted data.
c. Data is more useful than information in decision
making.

d. Data and information are not related.

Chapter
13-6 SO 1 The need for data collection and storage
 Storing
Storing and
and Accessing
Accessing Data
Data
Exhibit 13-1
Data Storage Terminology Data Hierarchy

Character Record Database

Field File

Chapter SO 2 Methods of storing data and the interrelationship

13-7
between storage and processing
 Storing
Storing and
and Accessing
Accessing Data
Data

Data Storage Media

Magnetic tape Early Days of

Mainframe
Sequential access Computers

Modern IT
Random Access Systems

Chapter SO 2 Methods of storing data and the interrelationship

13-8
between storage and processing
 Storing
Storing and
and Accessing
Accessing Data
Data

Concept Check
A character is to a field as

a. Water is to a pool.
b. A pool is to a swimmer.

c. A pool is to water.
d. A glass is to water.

Chapter SO 2 Methods of storing data and the interrelationship

13-9
between storage and processing
 Storing
Storing and
and Accessing
Accessing Data
Data

Concept Check
Magnetic tape is a form of

a. Direct access media.

b. Random access media.

c. Sequential access media.

d. Alphabetical access media.

Chapter SO 2 Methods of storing data and the interrelationship

13-10
between storage and processing
 Data
Data Processing
Processing Techniques
Techniques

Real-time
Batch Processing
Processing

Exhibit 13-2
Comparison of Batch and
Real-Time Processing

Chapter
13-11 SO 3 The differences between batch processing and real-time processing
 Data
Data Processing
Processing Techniques
Techniques

Concept Check
Which of the following is not an advantage of using
real-time data processing?

a. Quick response time to support timely record

keeping and customer satisfaction

b. Efficiency for use with large volumes of data .

c. Provides for random access of data.
d. Improved accuracy due to the immediate
recording of transactions.
Chapter
13-12 SO 3 The differences between batch processing and real-time processing
 Databases
Databases

Data stored in a form that allows the data to be

easily accessed, retrieved, manipulated, and stored.
Exhibit 13-3
Traditional File-
Oriented Approach

 Data
redundancy
 Concurrency

Chapter SO 4 The importance of databases and the historical progression

13-13
from flat-file databases to relational databases
 Databases
Databases
Exhibit 13-3
Database Approach

Relationships
 One-to-One
 One-to-Many
Database Management System (DBMS) is
software that manages the database and  Many-to-Many

controls the access and use of data by

individual users and applications.
Chapter SO 4 The importance of databases and the historical progression
13-14
from flat-file databases to relational databases
 The
The History
History of
of Databases
Databases
Exhibit 13-4
Flat File Database Model Database Table

 1950s and 1960s  Large volumes of similar

 Text format, sequential order transactions
 Sequential processing  Single record not easily
retrieved or stored

Chapter SO 4 The importance of databases and the historical progression

13-15
from flat-file databases to relational databases
 The
The History
History of
of Databases
Databases

Hierarchical Database Model

 Inverted tree structure
 Parent–child, represent one-to-many relationships
 Record pointer Exhibit 13-5
Linkages in a
Hierarchical Database

Chapter SO 4 The importance of databases and the historical progression

13-16
from flat-file databases to relational databases
 The
The History
History of
of Databases
Databases

Network Database Model

 Inverted tree structure

 More complex relationship linkages by use of

shared branches

 Not very popular, rarely used

Chapter SO 4 The importance of databases and the historical progression

13-17
from flat-file databases to relational databases
 The
The History
History of
of Databases
Databases

Relational Database Model

 Developed in 1969

 Stores data in two-dimensional tables

 Most widely used database structure today

 Examples include; IBM DB2, Oracle Database, and

Microsoft Access

Chapter SO 4 The importance of databases and the historical progression

13-18
from flat-file databases to relational databases
 Databases
Databases

Concept Check
If a company stores data in separate files in its
different departmental locations and is able to update
all files simultaneously, it would not have problems with

a. attributes.
b. data redundancy.

c. industrial espionage.
d. concurrency.

Chapter SO 4 The importance of databases and the historical progression

13-19
from flat-file databases to relational databases
 Databases
Databases

Concept Check
When the data contained in a database are stored in
large, two-dimensional tables, the database is referred
to as a

a. flat file database.

b. hierarchical database.

c. network database.
d. relational database.

Chapter SO 4 The importance of databases and the historical progression

13-20
from flat-file databases to relational databases
 Databases
Databases

Concept Check
Database management systems are categorized by the
data structures they support. In which type of
database management system is the data arranged in a
series of tables?
a. Network.
b. Hierarchical.
c. Relational.
d. Sequential.
Chapter SO 4 The importance of databases and the historical progression
13-21
from flat-file databases to relational databases
 The
The Need
Need for
for Normalized
Normalized Data
Data

Relational databases consist of several small tables.

Small tables can be joined in ways that represent
relationships among the data.
Exhibit 13-6
Relational Database in
Microsoft Access

Bolded field is
the primary key.

Chapter
13-22 SO 5 The need for normalization of data in a relational database
 The
The Need
Need for
for Normalized
Normalized Data
Data

Relational database has flexibility in

retrieving data. Structured query
language (SQL) has become the
industry standard.

Exhibit 13-7
Relational Database in
SELECT Customers.CustomerID, Customers.CompanyName, Microsoft Access
Orders.OrderID, Orders.ShippedDate FROM Customers INNER
JOIN Orders ON Customers.CustomerID Orders.CustomerID;
Chapter
13-23 SO 5 The need for normalization of data in a relational database
 The
The Need
Need for
for Normalized
Normalized Data
Data

The process of converting data into tables that meet the

definition of a relational database is called data
normalization.
 Seven rules of data normalization, additive.
 Most relational databases are in third normal form.
 First three rules of data normalization are:
1. Eliminate repeating groups
2. Eliminate redundant data
3. Eliminate columns not dependent on primary key.

Chapter
13-24 SO 5 The need for normalization of data in a relational database
 The
The Need
Need for
for Normalized
Normalized Data
Data

Trade-offs in Database Storage

Relational database

 Not most efficient way to store data that will be

used in other ways.

 Most organizations are willing to accept less

transaction processing efficiency for better query
opportunities.

Chapter
13-25 SO 5 The need for normalization of data in a relational database
 The
The Need
Need for
for Normalized
Normalized Data
Data

Concept Check
Which of the following statements is not true with
regard to a relational database?

a. It is flexible and useful for unplanned, ad hoc

queries.

b. It stores data in tables.

c. It stores data in a tree formation.

d. It is maintained on direct access devices.

Chapter
13-26 SO 5 The need for normalization of data in a relational database
 Use
Use of
of aa Data
Data Warehouse
Warehouse to
to Analyze
Analyze Data
Data

Management often needs data from several fiscal periods

from across the whole organization.

Exhibit 13-8
The Data Warehouse and
Operational Databases

Chapter
13-27 SO 6 Data warehouse and the use of a data warehouse to analyze data
 Use
Use of
of aa Data
Data Warehouse
Warehouse to
to Analyze
Analyze Data
Data

Management often needs data from several fiscal periods

from across the whole organization.

Build the data warehouse

Identify the data

Standardize the data

Cleanse, or scrub, the data

Upload the data

Chapter
13-28 SO 6 Data warehouse and the use of a data warehouse to analyze data
 Use
Use of
of aa Data
Data Warehouse
Warehouse to
to Analyze
Analyze Data
Data

Concept Check
A collection of several years’ nonvolatile data used to
support strategic decision-making is a(n)

a. operational database.
b. data warehouse.
c. data mine.
d. what-if simulation.

Chapter
13-29 SO 6 Data warehouse and the use of a data warehouse to analyze data
 Data
Data Analysis
Analysis Tools
Tools

Data mining is the process of searching for

identifiable patterns in data that can be used to
predict future behavior.

OLAP is a set of software tools that allow online analysis

of the data within a data warehouse. Analytical methods
in OLAP usually include:

1. Drill down 4. Time series analysis

2. Consolidation 5. Exception reports
3. Pivoting 6. What-if simulations

Chapter
13-30 SO 7 The use of OLAP and data mining as analysis tools
 Data
Data Analysis
Analysis Tools
Tools

Concept Check
Data mining would be useful in all of the following
situations except
a. identifying hidden patterns in customers’ buying habits.

b. assessing customer reactions to new products.

c. determining customers’ behavior patterns .

d. determining customers’ behavior patterns .

Chapter
13-31 SO 7 The use of OLAP and data mining as analysis tools
 Distributed
Distributed Data
Data Processing
Processing

Early days
 Centralized processing
 Centralized databases

Today’s IT Environment
 Distributed data processing (DDP)
 Distributed databases (DDB)

Chapter
13-32 SO 8 Distributed databases and advantages of the use of distributed data
 Distributed
Distributed Data
Data Processing
Processing

Distributing the processing and data offers the following

advantages:
1. Reduced hardware cost
2. Improved responsiveness
3. Easier incremental growth
4. Increased user control and user involvement
5. Automatic integrated backup

The most popular type of distributed system is a

client/server system.

Chapter
13-33 SO 8 Distributed databases and advantages of the use of distributed data
 Distributed
Distributed Data
Data Processing
Processing

Concept Check
A set of small databases where data are collected,
processed, and stored on multiple computers within a
network is a
a. Centralized database.

b. Distributed database.
c. Flat file database.

d. High-impact process.

Chapter
13-34 SO 8 Distributed databases and advantages of the use of distributed data
 IT
IT Controls
Controls for
for Data
Data and
and Databases
Databases

To ensure integrity (completeness and accuracy) of data

in the database, IT application controls should be used.
These controls are
 input,
 processing, and
 output controls such as
 data validation,
 control totals and reconciliation, and
 reports that are analyzed by managers.

Chapter
13-35 SO 9 Controls for data and databases
 Ethical
Ethical Issues
Issues Related
Related to
to Data
Data Collection
Collection

Ethical Responsibilities of the Company

Data collected and stored in databases in many instances
consist of information that is private between the
company and its customer.

Ten privacy practices for online companies:

1. Management 6. Access
2. Notice 7. Disclosure to third parties
3. Choice and consent 8. Security for privacy
4. Collection 9. Quality
5. Use and retention 10. Monitoring and enforcement
Chapter SO 10 Ethical issues related to data collection and
13-36
storage, and their use in IT systems
 Ethical
Ethical Issues
Issues Related
Related to
to Data
Data Collection
Collection

Ethical Responsibilities of Employees

Employees have an ethical obligation to avoid misuse
of any private or personal data about customers.

There are no specific IT controls that would always

prevent authorized employees from disclosing private
information.

Chapter SO 10 Ethical issues related to data collection and

13-37
storage, and their use in IT systems
 Ethical
Ethical Issues
Issues Related
Related to
to Data
Data Collection
Collection

Ethical Responsibilities of Customers

Customers have an obligation to

 provide accurate and complete information.

 keep any known company information confidential.

 avoid improper use of data that they gain from

accessing a database as a customer.

Chapter SO 10 Ethical issues related to data collection and

13-38
storage, and their use in IT systems
 Ethical
Ethical Issues
Issues Related
Related to
to Data
Data Collection
Collection

Concept Check
Each of the following is an online privacy practice
recommended by the AICPA Trust Principles Privacy
Framework except:
a. Redundant data should be eliminated from the database.

b. Notification of privacy policies should be given to

customers.

c. Private information should not be given to third parties

without the customer’s consent
d. All of the above.
Chapter SO 10 Ethical issues related to data collection and
13-39
storage, and their use in IT systems
 Copyright
Copyright

Copyright © 2008 John Wiley & Sons, Inc. All rights reserved.
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information contained herein.

Chapter
13-40