Chapter 1:
Accounting Information Systems
and the Accountant
Introduction
What Are Accounting Information Systems
(AIS)?
What’s New in AIS?
Accounting and IT
Careers in AIS
Chapter
1-1
Introduction
Applying information technology (IT) to accounting
systems




Financial accounting
Managerial accounting
Auditing
Taxation
Increased career opportunities


Specialized employment
Combine accounting and advanced computer skills
Chapter
1-2
Accounting Information Systems
An Accounting Information System (AIS)


Data and processing procedures
Creates needed information for users
AIS Today

Financial and non-financial data
 Enterprise-wide information system
 Business process focused
Chapter
1-3
The Accountant’s Challenge
Provide information to support decision-making
Business and Government processes
Accounting and Finance
Non-Accountants
Chapter
1-4
Information (versus Data)
Data



Raw facts
No organization or meaning
Beginning of audit trail
Information


Processed data
Meaningful to users
Chapter
1-5
AIS Components
Chapter
1-6
Computerized Data
Processing Problems
Information overload for users
Unable to identify input errors
Difficult to follow audit trails
Chapter
1-7
AIS and ERP
Accounting Information Systems


Internal and External users
Financial information
Enterprise Resource Planning Systems



Internal users
Financial and Nonfinancial information
Predictive analytics
Chapter
1-8
AIS and ERP
Overlapping of the Systems

Provide same information

Emphasize business processes

Integration into seamless databases
Chapter
1-9
Study Break #1
Which of the following is likely to be information rather than
data?
A. Sales price
B. Customer number
C. Net profit
D. Employee name
Chapter
1-10
Study Break #1 - Answer
Which of the following is likely to be information rather than
data?
A. Sales price
B. Customer number
C. Net profit
D. Employee name
Chapter
1-11
Study Break #2
With respect to computerized AIS, computers:
A. Turn data into information in all cases
B. Make audit trails easier to follow
C. Cannot catch mistakes as well as humans
D. Do not generally process information more quickly than
humans
Chapter
1-12
Study Break #2 - Answer
With respect to computerized AIS, computers:
A. Turn data into information in all cases
B. Make audit trails easier to follow
C. Cannot catch mistakes as well as humans
D. Do not generally process information more quickly than
humans
Chapter
1-13
AIS: Role in Organizations
Information Age


Impact of technology
Fewer workers producing goods
Knowledge workers


Produce, analyze, manipulate, and distribute information
Focus on business activities
Chapter
1-14
AIS: Role in Organizations
E-Business


Conducting business over the Internet
Increased importance and growth
E-Commerce


Subset of e-business
Buying and selling transactions
Chapter
1-15
What’s New in AIS?
Cloud Computing
Sustainability Reporting
Suspicious Activity Reporting
Forensic Accounting, Governmental
Accountants, and Terrorism
Corporate Scandals and Accounting
Chapter
1-16
Cloud Computing
Chapter
1-17
Disadvantages of Cloud
Computing
Reliability of Internet Connection
Data Security Measures of Provider
Quality of Service
Reliability of Service Provider
Chapter
1-18
Sustainability Reporting
Reporting Nonfinancial Measures

Impacts on income, value, or future performance
Chapter
1-19
Suspicious Activity Reporting
Chapter
1-20
Forensic Accounting
Forensic Accounting


Combines skills of investigation, accounting, and auditing
Provides evidence of criminal activity
Examples of AIS Uses in Forensic Accounting





Identifying and denying financial aid to terrorists
Tracing arms and chemical orders to final destination
Planning for catastrophic events
Controlling cyber terrorism
Detecting money laundering and illegal transfers
Chapter
1-21
Corporate Scandals and
Accounting
Enron (2001)


Manipulation of accounting records
Understate liabilities and inflate earnings
Bernard Madoff (2008)



Investment fund manager
Ponzi scheme
Resulted in billions of dollars in losses
Chapter
1-22
Study Break #3
The Sarbanes-Oxley Act of 2002:
A. Enables U.S. officers to wire tap corporate phones if
required
B. Has led to a decrease in the amount of work done by
auditors and accountants
C. Forbids corporations from making personal loans to
executives
D. Requires the CEO of a public company to take
responsibility for the reliability of its financial statements
Chapter
1-23
Study Break #3 - Answer
The Sarbanes-Oxley Act of 2002:
A. Enables U.S. officers to wire tap corporate phones if
required
B. Has lead to a decrease in the amount of work done by
auditors and accountants
C. Forbids corporations from making personal loans to
executives
D. Requires the CEO of a public company to take
responsibility for the reliability of its financial statements
Chapter
1-24
Study Break #4
The acronym SAR stands for:
A. Simple accounting receipts
B. Suspicious accounting revenue
C. Suspicious activity reporting
D. Standard accounts receivable
Chapter
1-25
Study Break #4 - Answer
The acronym SAR stands for:
A. Simple accounting receipts
B. Suspicious accounting revenue
C. Suspicious activity reporting
D. Standard accounts receivable
Chapter
1-26
Accounting and IT
Chapter
1-27
Objectives of Financial
Accounting
External



Provide relevant information
Investors, Creditors
Financial Statements
Internal

Provide relevant information
 Planning, decision making, and control activities
 Division managers, product managers
Chapter
1-28
The Accounting Cycle
Chapter
1-29
Financial Accounting
Non-Financial Data


REA Accounting
Resources, Events, and Agents
Real-Time Reporting
Interactive Data and XBRL


Reusable data in multiple applications
“Tagging” data
Chapter
1-30
Managerial Accounting
Objective


Provide relevant information
Internal users (Managers)
Components


Cost Accounting
Budgeting
Chapter
1-31
Cost Accounting
Measure and Control Costs

Acquisition, processing, distribution, and selling
activities
AIS Examples


Activity-Based Costing
Corporate Performance Measurement and Business
Intelligence
Chapter
1-32
Activity-Based Costing
Assigning of Overhead


Increased automation created difficulties
Lacked direct relationship between labor and
overhead
AIS Implementation


Easier assignment of overhead
Important aspect of strategic planning
Chapter
1-33
Corporate Performance
Measurement
Responsibility Accounting System


Trace unfavorable performance to responsible
department or individuals
Immediate corrective action by managers
Balanced Scorecard




Financial Performance
Customer Knowledge
Internal Business Processes
Learning and Growth
Chapter
1-34
Business Intelligence and
Dashboards
Chapter
1-35
Budgeting
Definition

Financial projection for the future
 Short-range and long-range
Usefulness


Managerial control
Compare actual and budgeted results
Chapter
1-36
Study Break #5
A dashboard is:
A. A computer screen used by data entry clerks for input
tasks
B. A physical device dedicated to AIS processing tasks
C. A summary screen typically used by managers
D. A type of blackboard used by managers to present useful
information to others
Chapter
1-37
Study Break #5 - Answer
A dashboard is:
A. A computer screen used by data entry clerks for input
tasks
B. A physical device dedicated to AIS processing tasks
C. A summary screen typically used by managers
D. A type of blackboard used by managers to present useful
information to others
Chapter
1-38
Study Break #6
Assigning overhead costs based on the resources, rather
than only direct labor, used in manufacturing is an example
of:
A. Activity-based costing (ABC)
B. Budgeting
C. Cost-plus accounting
D. Financial, rather than managerial, accounting
Chapter
1-39
Study Break #6 - Answer
Assigning overhead costs based on the resources, rather
than only direct labor, used in manufacturing is an example
of:
A. Activity-based costing (ABC)
B. Budgeting
C. Cost-plus accounting
D. Financial, rather than managerial, accounting
Chapter
1-40
Auditing
Traditional role

Evaluate the accuracy and completeness of a
corporation’s financial statements
Present role
Evaluate client’s compliance with HIPAA laws
 IT evaluations and audits (security, privacy)
 Management consulting

Chapter
1-41
Taxation
Taxation Software

Example of AIS
 Create and evaluate tax strategies
 Transmit completed forms
Professional Usage



Research challenging questions
Access more up-to-date information
Database access
Chapter
1-42
Careers in Accounting
Information Systems
Traditional Accounting

Understanding of accounting and information systems
 Certified Information Technology Professional
Systems Consulting



Designing systems and reengineering processes
Software and hardware selection
Value-added resellers (VARs)
Chapter
1-43
Careers in Accounting
Information Systems
Certified Fraud Examiner

Professional certification
 Association of Certified Fraud Examiners (ACFE)
IT Auditing and Security




Risk analysis with Information Systems
Aid financial auditors in evaluation of controls
Certified Information Systems Auditors (CISAs)
Penetration testing
Chapter
1-44
AIS at Work: Consulting
Work for CPAs
Disaster Recovery Planning


Assures continuity of operations
Must test plan regularly
IT Exposure

Viruses and Worms
Auditing Standard No. 60

Report lack of disaster plan
Chapter
1-45
Copyright
Copyright 2012 John Wiley & Sons, Inc. All rights reserved.
Reproduction or translation of this work beyond that permitted in
Section 117 of the 1976 United States Copyright Act without the
express written permission of the copyright owner is unlawful.
Request for further information should be addressed to the
Permissions Department, John Wiley & Sons, Inc. The purchaser
may make backup copies for his/her own use only and not for distribution
or resale. The Publisher assumes no responsibility for errors, omissions,
or damages, caused by the use of these programs or from the use of the
information contained herein.
Chapter
1-46
Chapter 1
Chapter
1-47