Lecture 1 - Arif Sariarifsari.net/ais405course/Lecture1.pdfIntroduction to Accounting Information Systems Lecture 1. ... Standard No. 5) ... Coping with information overload 5

A I S 4 0 5 : A c c o u n t i n g I n f o r m a t i o n S y s t e m s

Introduction to AccountingInformation Systems

Lecture 1

Introduction to AccountingInformation Systems

Appreciate the complex, dynamic environment inwhich accounting is practiced.Relationship between the Accounting Information

Systems and the organization’s business processes.Attributes of quality information.Components of an information systemHow information is used for different types of

decisions and at various levels in the organization.How the information system supports the

management function.Role of accountant in relation to the current

environment for the AIS.AIS 405 : Lecture 1 2

Tools of Trade

3AIS 405 : Lecture 1

Sarbanes-Oxley Act of 2002

Implications for both public and private accountants:

Section 404 (as modified by PCAOB AuditingStandard No. 5) –Management must identify, document, and

evaluate significant internal controls.Auditors must report on the effectiveness of the

organization’s system of internal controls.


Sarbanes-Oxley Act of 2002 . . .

Implications for both public and private accountants:

Section 409 –Requires disclosure to the public on a

“rapid and current” basis of material changes in anorganization’s financial condition.


CICA 2009 Top Ten IT Issues1. Maintaining adequate controls during the recession2. Maintaining security over moving data3. Lack of effective IT governance4. Coping with information overload5. Impact of IFRS on Information Systems6. Green computing7. Security requirements of the Payment Card Industry8. Malicious activity by laid-off employees9. Role of Web 2.0 applications in organizational

information systems10. Shortage of IT skills


Business Environment

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IndustryThe Company

Competitors

Technologies

Customers

EconomicForces

PeopleCapital

Technology

Value Chain Products

Structure

Objectives

Strategies

Measurements

AIS 405 : Lecture 1

Value Chain & Five Forces Model


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Porter’ s Value Chain

FIRM INFRASTRUCTURE

INBOUNDLOGISTICS

OPERATIONS OUTBOUNDLOGISTIC

MARKETING& SALESLOGISTIC

SERVICE

HUMAN RESOURCE MANAGEMENT

TECHNOLOGY DEVELOPMENT

PROCUREMENT

VALUE

COST MARGIN

AIS 405 : Lecture 1

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KNOWLEDGE

Database

PROCESS

Information ProcessingBusiness Rules, Procedures

INTERFACE

Input, OutputLocation, Security

BUSINESSCONTEXT

Hardware Software Networking

TECHNOLOGY DRIVERS

ERP, Object, Mobile,Collaborative, etc.

BUSINESS DRIVERSBPR, CRM,SCM, e-Biz, etc.

KNOWLEDGE

Database

PROCESS

Information ProcessingBusiness Rules, Procedures

INTERFACE

Input, OutputLocation, Security

BusinessData

BusinessUsers

Hardware Software Networking

BUSINESSCONTEXT

AIS 405 : Lecture 1

Elements in the Study of IS / AIS


Systems and Subsystems …

System: a set of interdependent elements thattogether accomplish specific objectives. A systemmust have organization, interrelationships,integration, and central objectives.Subsystem: a part of a system. Within limits, any

system or subsystem can be divided into itscomponent parts.


Systems and Subsystems

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INPUT OUTPUT

AIS 405 : Lecture 1

Systems and Subsystems . . .


Systems and Subsystems . . .


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System Decomposition Diagram

AIS 405 : Lecture 1

The Information System (IS)

An information system (IS) or managementinformation system (MIS) is a manmade system thatconsists of an integrated set of computer-basedand manual components established to collect,store, and manage data and to provide outputinformation to users. (Gelinas et al.)


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Information Technology Vs. Information System

Information Technology (IT): A combination ofcomputer technology (hardware and software)with telecommunications technology (data, image,and voice networks)

Information System (IS): People, data, processes,and information technology that interact to collectdata, store, process, and provide as output theinformation needed to support and improveoperational, tactical, and strategic activities of anorganization (business).

AIS 405 : Lecture 1

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Information Technology Vs. Information System

Combinations ofhardware, software,and telecomnetworks use toprocess data

Combinations ofhardware, software,and telecomnetworks that peoplebuild and use tocollect, create, anddistribute useful datain organizations (fordecision making)

AIS 405 : Lecture 1

Functional Model of an Information System


Accounting Information System (AIS)

Accounting information system (AIS) is a specializedsubsystem of the IS.Collect, process and report information related to

the financial aspects of business events.Often integrated and indistinguishable from the

overall information system.Like the IS, the AIS may be divided into components

based on the operational functions supported.Components are called business processes or AISsubsystems.


Business Process in Enterprise Systems

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A business process is a set of related steps orprocedures designed to produce a specificoutcome.

AIS 405 : Lecture 1

Business Process Components

Information process: portion of the overall IS relatedto a particular business process.Operations process: man-made system consisting of

the people, equipment, organization, policies, andprocedures whose objective is to accomplish thework of the organization.Management process: man-made system consisting

of the people, authority, organization, policies, andprocedures whose objective is to plan and controlthe operations of the organization.


Business Process Activities (Events)

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Decision /management

events

Operatingevents

Informationevents

Define &Trigger

Trigger Trigger

AIS 405 : Lecture 1

Transforming Data into Information …


Basic System Model


Example: Architecture of A Payroll System


Information Qualities


Key Information Qualities

Validity: information about actual authorized eventsand objects.Accuracy: correspondence or agreement between

the information and the actual events or objectsthat the information represents.Completeness: degree to which information

includes data about every relevant object or eventnecessary to make a decision and includes thatinformation only once.


Management Decision Making

Intelligence: Searching the environment forconditions calling for a decision. Design: Inventing, developing, and analyzing

possible courses of action. Choice: Selecting a course of action.


Decision Making Process


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Information Systems in Organization

STRATEGIC

OPERATIONAL

EXECUTIVE INFORMATION SYSTEMS

MANAGEMENT INFORMATION SYSTEMS

TRANSACTION PROCESSING SYSTEMS

ACCT

FINANCE

HR

PRODCTN

SALES

OTHERS

TACTICAL

VALUE CHAIN

AIS 405 : Lecture 1

Business ProcessReengineering/Redesign

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IT/IS contributes to Business ProcessReengineering / Redesign (BPR) :Efficient: Do thing right (cheaper)Effective: Do right thing (better)Competitive: Do thing differently

(faster/newer)

AIS 405 : Lecture 1

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Decision-Making in an Organization

AIS 405 : Lecture 1

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Decision-Making Levelsin an Organization

Executive Level• Long-term decisions (Strategies)• Unstructured decisions (Competitions)Managerial Level

• Decisions covering weeks and months (Tactics)• Semi-structured decisions (Effectiveness)Operational Level

• Day-to-day / repetitive decisions (Operations)• Structured decisions (Efficiency)

AIS 405 : Lecture 1

Management Problem Structureand Information Requirements


Structure of Decisions

Structured decisions: those for which all threedecision phases (intelligence, design, and choice)are relatively routine or repetitive.Unstructured decisions: those for which none of the

decision phases (intelligence, design, or choice) areroutine or repetitive.Semi-structured decisionsRisk Factors in Judgments: No-risk, risky, high-risk

Decisions


Horizontal vs. Vertical Information Flows

Horizontal information flows relate to specificbusiness events, such as one shipment, or toindividual inventory items. The information movesthrough operational units such as sales, thewarehouse, and accounting.

Vertical information flows service a multi-levelmanagement function from operations andtransaction processing through tactical, operations,and strategic management.


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Organizational Information Systems

AIS 405 : Lecture 1

Operational Level


Operational Level

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Day-to-day business processes Interactions with customers Information systems used to:

• Automate repetitive tasks• Improve efficiency Decisions:

• Structured• Recurring• Can often be automated using IS

AIS 405 : Lecture 1

Architecture


Data Processing• Online processing• Batch processingData Input

• Manual data entry• Semi-automated data entry (bar-code + manual)• Fully automated data entry (bar-code)

Transaction Processing Systems . . .


Managerial Level


Managerial Level

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Functional managers• Monitoring and controlling operational-level

activities• Providing information to executive level• Midlevel managers

- Focus on effectively utilizing and deploying resources- Goal of achieving strategic objectives

Managers’ decisions• Semi-structured• Contained within business function• Moderately complex• Time horizon of few days to few months

AIS 405 : Lecture 1

Architecture


Executive Level


Executive Level

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The president, CEO, vice presidents, boardof directors Decisions

• Long-term strategic issues• Complex and non-routine problems• Unstructured decisions• Long-term ramifications

AIS 405 : Lecture 1

Architecture


Information SystemsSupporting the Functional Areas


Information Systemsthat Span Organizational Boundaries


Information System Stakeholders


Information System Stakeholders


Role of Accountantin Current Business Environment

Designer — application of accounting principles,auditing principles, IS techniques, and systemsdevelopment methods to design an AIS.User — participate in the AIS design process.Auditor — provide audit and assurance services.


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Lecture 1 - Arif Sariarifsari.net/ais405course/Lecture1.pdfIntroduction to Accounting Information Systems Lecture 1. ... Standard No. 5) ... Coping with information overload 5