Accounting Information Systems: Essential Concepts and Applications Fourth Edition by Wilkinson, Cerullo, Raval, and Wong-On-WingChapter 3: AIS Enhancements Through Information Technology and NetworksSlides Authored by Somnath Bhattacharya, Ph.D.Florida Atlantic University

Importance of IT and Computer Networks to AccountantsTo use, evaluate, and develop a modern AIS, accountants must be familiar with ITComputers enable accountants to perform their duties more quickly, accurately, and consistently than by manual methodsSoftware such as electronic spreadsheets aid accountants in analyzing financial statements and in developing budgets

IT Components of Interest to AccountantsDevices for data entryData ProcessingData CommunicationInformation GenerationData BasesData Modeling conceptsEvaluation of internal controls in AISVariety of software packagesComputer Networks

Networks & AccountantsBecause they transmit data and information, networks are an integral part of AISNetworks are vulnerable to high level risk thus requiring special controls and security measures.Need to prevent loss of accounting records & informationNeed to ensure accuracy of dataNetworks may be used to consolidate data into financial information

Gains from IT for AccountantsFaster processing of transactions and other dataGreater accuracy in computations of and comparisons with dataLower cost of processing each transactionMore timely preparation of reports and other outputsMore concise storage of data, with greater accessibility when neededWider range of choices for entering data and providing outputsHigher productivity for employees and managers, who learn to use computers effectively in their routine and decision-making responsibilities

Task Matching to ComputersManualExceptional/infrequent transactionsSetting objectives and policy-making judgmentsNew problemsSupervising employeesSocial communicationsMaking complex strategic decisionsComputerizedCollecting and processing large volumes of routine transactionsStoring large quantities of data and informationMonitoring and controlling continuous processesAnswering specific inquiries based on stored dataPreparing complex analyses and extensive reportsHelping gather data and understanding the relationships between all types of decisions Figure 3-1

Limitations of Infoages Legacy AISLarge portion of personnel time and effort spent on systems maintenanceLittle time & effort for value-added servicesLittle flexibility to changing business conditionsFinancial and Operational data not integratedDifficult to generate data with both financial and non-financial componentsThe transaction processing systems focus on chart of accounts classificationIgnore the multidimensional aspects of transactionsFiles related to applications are not integratedInefficiencies of the manual system remodeled in automated formBusiness processes and accounting procedures not analyzed and improved upon prior to conversion to automated formSystem not geared to generate timely decision-support informationComputer programmers required to write new programs for ad hoc queries

Types of Network ArchitecturesWide-Area NetworksFormed among computers and inter-connected devices that are geographically distant from one anotherLocal-Area NetworksA type of distributed network created when two or more linked computers are grouped within a limited geographical area

Centralized WANs - IConcentrates all application processing at one geographical locationConsists essentially of one (or a cluster of) central mainframe computer(s) and one or more physically remote terminalsTypically all hardware, software, and data processing personnel are located at corporate headquarters Advantages include: the concentrated computing power of a large processorlow operating costs per transaction leading to economies of scalecan facilitate the use of a database approachfacilitate better security provisionsallow for greater standardization and professional planning and control of information-related activities

Centralized WANs - IIBest suited forFirms with centralized organizational structuresFirms with homogeneous operationsFirms with low processing activity at remote sitesExamples includeSavings and loan institutionsBanks with many ATMs and branchesMerchandizing chainsMotelsAirlinesDrawbacks includeInflexibilityExpensive and complicated software neededVulnerable to disasters as a result of complete dependence on central computerNot user-friendly

Distributed WANs - IThis links fully functional computers in different geographical locations.Each remote site processes its own applications. However, users may not have easy access to centralized data or be able to transmit data and information rapidly.Computers may be interconnected by data communications hardware and software to other remote sites and to a central computer facility to form an enterprise-wide network.

Distributed WANs - IIDistributed databases are useful when:Large volumes of data need to be processed at remote locationsManagers and employees need very fast access to data on a frequent basisDatabases may be distributed by replication or partition.Replication: Copies of files from the main data base are stored at remote locationsPartition: Segments of files are allocated to various locations within the networkThis avoids data redundancy, but increases the complexity of transmitting data throughout the networkLikely to become the dominant approach as technology improvesAt present most data bases are a hybrid of the two approaches

Benefits of Distributed WANsCan be responsive to diverse needs of usersEnable network facilities to be used efficiently since processing jobs can be routed to unused computer systems in the networkAre robust against individual computer failuresFlexible and adaptable to changeBest suited for firms with:Decentralized organizational structuresDiverse operations or user groupsClustered functions at various locationsMultiple products Manufacturing operationsA variety of services

Drawbacks of Distributed WANsDifficulty in maintaining adequate control and securityEach distributed processing location needs its own set of controls and security measuresGiven the smallness of each location, organizational independence is not easily achievedManagers may sacrifice control and security for greater productivityDifficulty and cost of coordinating the relatively independent and sometimes incompatible computer systemsAdded costs for multiple computers, other system components, and communication services

LANsA LAN may be connected to other LANs and/or WANs via hardware devices known as gateways or bridgesAt the heart of a LAN is the workstationMicrocomputer-based workstationTraditional workstationSuper workstation

Peer-to-Peer LANsIn smaller LANs, every workstation functions as both a client and a server This allows all users to share data and files on all workstationsCalled peer-to-peer network since no workstations are dedicated to perform only server functionsCompared to a server network, peer-to-peer networks are less costly, easier to install, and compare well against server networks of similar sizeNumber expected to significantly increase in the near future

Server NetworksMay interconnect hundreds of workstationsMore difficult to manage and interpret than peer-to-peer networksProvide greater security than peer-to-peer networksAt least one workstation is dedicated to performing specific server tasksExamples include:ServersDatabase serversPrint serversCommunications serversTransaction processing serversLarge server networks often contain multiple servers

The Network Operating SystemIn peer-to-peer networks, the Network Operating Software (NOS) is installed in each user workstationIn a server network, most of the NOS is installed in the file server and a portion also resides in each workstationTo run centralized LAN applications, the NOS installed in the file server interacts with the NOS and the local operating system installed in the workstation. The client workstation NOS initiates a request to the file server NOS to load files and programs into the client workstations RAMIn a peer-to-peer network, a client NOS initiates a request to another client NOS, which also functions as a server, to load the requested files and/or programs into RAM

More NetworksExamples of pre-developed network configurations resident in Network Interface Cards include: Ethernet, Token Ring, and ARC-netThe International Standards Organization has issued the Open Systems Interconnection (OSI) modelOpen Systems ArchitectureSeamless exchange of data, files, and software between LANs and WANs built with multiple vendors hardware, software, and networking components

Client/Server NetworksThis model splits data processing between a user workstation (client) and one or more serversMajority of servers are dedicated database servers, thereby enabling client to share data and files, conduct database searches, and update the databaseOne of the fastest growing segments of IT

Cooperative Client/Server ComputingMost commonly implemented mode of client/server architectureFacilitates the optimal sharing of computer resources since the client(s) and server(s) jointly process the dataClients typically employ Graphical User Interfaces (GUIs)Data-processing locale is transparent to the user

Network TopologiesThe STAR and RING topologies apply to both distributed WANs and LANsThe BUS topology applies only to LANsAll three found in client/server networksAll three may be combined to form hybrid configurations

The STAR ConfigurationFigure 3-3a

The RING ConfigurationFigure 3-3b

The BUS ConfigurationFigure 3-3c

Enterprise-wide Processing and Data SystemsEnterprise-wide on-line transaction processing systems collect and process mission-critical accounting and operational applicationsEnterprise Resource Planning Systems (ERP) such as SAP R/3 overcome the limitations of legacy applicationsFirms typically develop two types of On-line Analytical Processing (OLAP) systems that supplement ERP or legacy systemsA firm can model the relevant aspects of business events contained within the business processes allowing for the use of relational database-related query language commandsFirms can create a data mart or data warehouse to generate predefined reports for executives and other managers

Data Marts and Data WarehousesBoth Data Marts and Data Warehouses organize and store copies of informational or decision support dataA Data Mart stores copies of decision support data in a data base for a portion of a companyA Data Warehouse stores copies of decision support data in an integrated data base for an entire enterpriseAs opposed to applications-oriented data in legacy systems, data in a data mart or warehouse are stored by subject areas (e.g., customers)Data may be stored in both summarized or raw formBoth have drill down and data mining features

Specialized Inter-organizational Systems/NetworksInternet Commerce and Electronic CommercePoint-of-Sale Systems/NetworksElectronic Funds Transfer (EFT) SystemsElectronic Data Interchange (EDI) SystemsValue Added Networks (VANs)The Internet (TCP/IP)The World Wide Web (WWW)Hypertext information retrieval systemIntranetsExtranets

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