Chapter 1-1

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 1-2

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 1-3

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 1-4

The Accountant’s Challenge

Provide information to support decision-making

Business and Government processes

Accounting and Finance

Non-Accountants

Chapter 1-5

Data Raw facts No organization or meaning Beginning of audit trail

Information Processed data Meaningful to users

Information (versus Data)

Chapter 1-6

AIS Components

Chapter 1-7

Computerized Data Processing Problems

Information overload for users

Unable to identify input errors

Difficult to follow audit trails

Chapter 1-8

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 1-9

AIS and ERP

Overlapping of the Systems Provide same information

Emphasize business processes

Integration into seamless databases

Chapter 1-10

Which of the following is likely to be information rather than data?

A. Sales price

B. Customer number

C. Net profit

D. Employee name

Study Break #1

Chapter 1-11

Which of the following is likely to be information rather than data?

A. Sales price

B. Customer number

C. Net profit

D. Employee name

Study Break #1 - Answer

Chapter 1-12

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

Study Break #2

Chapter 1-13

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

Study Break #2 - Answer

Chapter 1-14

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 1-15

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 1-16

What’s New in AIS?

Cloud Computing

Sustainability Reporting

Suspicious Activity Reporting

Forensic Accounting, Governmental Accountants, and Terrorism

Corporate Scandals and Accounting

Chapter 1-17

Cloud Computing

Chapter 1-18

Disadvantages of Cloud Computing

Reliability of Internet Connection

Data Security Measures of Provider

Quality of Service

Reliability of Service Provider

Chapter 1-19

Sustainability Reporting

Reporting Nonfinancial Measures Impacts on income, value, or future performance

Chapter 1-20

Suspicious Activity Reporting

Chapter 1-21

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 1-22

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 1-23

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

Study Break #3

Chapter 1-24

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

Study Break #3 - Answer

Chapter 1-25

The acronym SAR stands for:

A. Simple accounting receipts

B. Suspicious accounting revenue

C. Suspicious activity reporting

D. Standard accounts receivable

Study Break #4

Chapter 1-26

The acronym SAR stands for:

A. Simple accounting receipts

B. Suspicious accounting revenue

C. Suspicious activity reporting

D. Standard accounts receivable

Study Break #4 - Answer

Chapter 1-27

Accounting and IT

Chapter 1-28

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 1-29

The Accounting Cycle

Chapter 1-30

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 1-31

Managerial Accounting

Objective Provide relevant information Internal users (Managers)

Components Cost Accounting Budgeting

Chapter 1-32

Cost Accounting

Measure and Control Costs Acquisition, processing, distribution, and selling

activities

AIS Examples Activity-Based Costing Corporate Performance Measurement and Business

Intelligence

Chapter 1-33

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 1-34

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 1-35

Business Intelligence and Dashboards

Chapter 1-36

Budgeting

Definition Financial projection for the future Short-range and long-range

Usefulness Managerial control Compare actual and budgeted results

Chapter 1-37

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

Study Break #5

Chapter 1-38

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

Study Break #5 - Answer

Chapter 1-39

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

Study Break #6

Chapter 1-40

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

Study Break #6 - Answer

Chapter 1-41

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 1-42

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 1-43

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 1-44

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 1-45

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 1-46

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 theexpress written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchasermay 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 1-47

Chapter 1