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Chapter 1:

Accounting Information Systems


and the Accountant

Introduction
What Are Accounting Information Systems
(AIS)?
Whats 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 Accountants
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
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Whats 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 statementsChapter
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 statementsChapter
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
corporations financial statements
Present role
Evaluate clients 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
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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.
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use of the information contained herein.

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Chapter 1

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