9-1 Prepared by Coby Harmon University of California, Santa Barbara Westmont College.
Chapter 1-1 Prepared by Coby Harmon University of California, Santa Barbara Westmont College.
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Transcript of Chapter 1-1 Prepared by Coby Harmon University of California, Santa Barbara Westmont College.
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Chapter 1-1
Prepared byCoby Harmon
University of California, Santa BarbaraWestmont College
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Chapter 1-2
Accounting Information Systems, 2nd Edition
Introduction to AIS
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Chapter 1-3
1. An overview of business processes
2. An overview of an accounting information system
3. The business process linkage throughout the supply chain
4. The IT enablement of business processes
5. Basic computer and IT concepts
6. Examples of IT enablement
7. The internal control structure of organizations
8. The importance of accounting information systems to
accountants
9. The relation of ethics to accounting information systems
Study ObjectivesStudy ObjectivesStudy ObjectivesStudy Objectives
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Chapter 1-4
Overview of Business ProcessesOverview of Business ProcessesOverview of Business ProcessesOverview of Business Processes
SO 1 An overview of business processes
Accounting Information System must identify the
► Transactions to record,
► Capture all details,
► Properly process into correct accounts, and
► Provide reports externally and internally.
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Chapter 1-5 SO 1 An overview of business processes
Business Process - a sequence of work steps performed in
order to produce a desired result.
Examples:
► Completing a sale
► Purchasing raw materials
► Paying employees
► Paying vendors
Overview of Business ProcessesOverview of Business ProcessesOverview of Business ProcessesOverview of Business Processes
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Chapter 1-6 SO 1 An overview of business processes
Four general types of business processes:
Overview of Business ProcessesOverview of Business ProcessesOverview of Business ProcessesOverview of Business Processes
1. Revenue Processes (Chapters 8)
a. Sales
b. Sales return
c. Cash collection
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Chapter 1-7 SO 1 An overview of business processes
2. Expenditure Processes (Chapters 9 and 10)
a. Purchase
b. Purchase return
c. Cash disbursement
d. Payroll
e. Fixed asset
Overview of Business ProcessesOverview of Business ProcessesOverview of Business ProcessesOverview of Business Processes
Four general types of business processes:
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Chapter 1-8 SO 1 An overview of business processes
Overview of Business ProcessesOverview of Business ProcessesOverview of Business ProcessesOverview of Business Processes
Four general types of business processes:
3. Conversion Processes (Chapter 11)
a. Planning
b. Resource management
c. Logistics
4. Administrative Processes (Chapter 12)
a. Capital
b. Investment
c. General ledger
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Chapter 1-9 SO 1 An overview of business processes
Internal controls are the set of procedures and policies
adopted to:
1. safeguard assets,
2. check accuracy and reliability of data,
3. promote operational efficiency, and
4. encourage adherence to prescribed managerial practices.
Overview of Business ProcessesOverview of Business ProcessesOverview of Business ProcessesOverview of Business Processes
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Chapter 1-10
d. revenue process
When a customer returns goods that were purchased, the business process to accept the return would most likely be a(n)
Review Question
SO 1 An overview of business processes
1. Revenue Processes
a. Sales
b. Sales return
c. Cash collection
b. conversion process
c. expenditure process
a. administrative process
Overview of Business ProcessesOverview of Business ProcessesOverview of Business ProcessesOverview of Business Processes
Advance slide in presentation mode to
reveal answer.
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Chapter 1-11
Exhibit 1-1Overview of an AccountingInformation System
The Accounting Information SystemThe Accounting Information SystemThe Accounting Information SystemThe Accounting Information System
SO 2 An overview of an accounting information system
Various Business Processes
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Chapter 1-12
Which of the following is least likely to be an output of the accounting information system?
a. a check
b. a report
c. an invoice
d. a bar code
A bar code is usually an input to the accounting information system.
The Accounting Information SystemThe Accounting Information SystemThe Accounting Information SystemThe Accounting Information System
SO 2 An overview of an accounting information system
Review Question
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Chapter 1-13
► Vendors
► Service providers
Supply Chain - processes and information flows that involve
the movement of materials, funds, and related information
through the full logistics process, from the acquisition of raw
materials to the delivery of finished products to the end user.
The supply chain includes all:
Process Throughout the Supply ChainProcess Throughout the Supply ChainProcess Throughout the Supply ChainProcess Throughout the Supply Chain
SO 3 The business process linkage throughout the supply chain
► Customers
► Intermediaries
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Chapter 1-14
Supply Chain Management - the organization and
control of all materials, funds, and related information in the
logistics process, from the acquisition of raw materials to the
delivery of finished products to the end user (customer).
Process Throughout the Supply ChainProcess Throughout the Supply ChainProcess Throughout the Supply ChainProcess Throughout the Supply Chain
SO 3 The business process linkage throughout the supply chain
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Chapter 1-15
Exhibit 1-2A Simplified Supply Chain for McDonald’s
A simplified Supply Chain for McDonald’s
SO 3 The business process linkage throughout the supply chain
Process Throughout the Supply ChainProcess Throughout the Supply ChainProcess Throughout the Supply ChainProcess Throughout the Supply Chain
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Chapter 1-16 SO 3 The business process linkage throughout the supply chain
The Real WorldThe Real WorldThe Real WorldThe Real World
An organization such as McDonald’s must have many different suppliers of the
same product because of the need for fresh ingredients. For example, the regional
bakery in the next exhibit provides buns for McDonald’s in a five-state area.
As you have traveled, you may have noticed that your Big Mac is always the same,
no matter where you go. Even the buns are exactly the same in each town and city.
McDonald’s plans for this uniformity in buns and must have many suppliers
throughout the world that can make and deliver a consistent quality bun.
East Balt Inc. is one of the large bakeries that supplies McDonald’s with buns. East
Balt bakeries make these buns according to strict standards of size, shape, color,
height, and seed coverage. To maintain freshness, the buns have to be baked in
regional locations. It would be much too difficult to have one central location bake all
buns for McDonald’s. Therefore, McDonald’s must have many different suppliers of
buns throughout the world.
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Chapter 1-17
c. The supply chain includes information flows.
Which of the following is not true of the supply chain?
SO 3 The business process linkage throughout the supply chain
Process Throughout the Supply ChainProcess Throughout the Supply ChainProcess Throughout the Supply ChainProcess Throughout the Supply Chain
Review Question
a. The supply chain includes vendors.
b. The supply chain excludes customers.
d. The supply chain includes secondary suppliers.
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Chapter 1-18
Information Technology - Computers, ancillary
equipment, software, services, and related resources as applied to support business processes.
IT Enablement - Using IT systems to enhance efficiency
and effectiveness of internal or supply chain processes.
IT Enablement of Business ProcessesIT Enablement of Business ProcessesIT Enablement of Business ProcessesIT Enablement of Business Processes
SO 4 The IT enablement of business processes
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Chapter 1-19
IT usage accomplishes one or more of the following
objectives:
1. Increased efficiency of business processes
2. Reduced cost of business processes
3. Increased accuracy of the data related to business processes
IT Enablement of Processes and the AISIT Enablement of Processes and the AISIT Enablement of Processes and the AISIT Enablement of Processes and the AIS
SO 4 The IT enablement of business processes
Business Process Reengineering (BPR) is the
purposeful and organized changing of business processes to make them more efficient.
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Chapter 1-20
Which of the following is not an objective of IT enablement?
a. increased accuracy of data
b. reduced cost
c. reduced security problems
d. increased efficiency
Process Throughout the Supply ChainProcess Throughout the Supply ChainProcess Throughout the Supply ChainProcess Throughout the Supply Chain
Review Question
SO 4 The IT enablement of business processes
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Chapter 1-21
Basic Computer Data Structures
Basic Computer and IT ConceptsBasic Computer and IT ConceptsBasic Computer and IT ConceptsBasic Computer and IT Concepts
SO 5 Basic computer and IT concepts
Data hierarchy:
1. Bit, or binary digit
2. Byte
3. Field
4. Record
5. File
6. Database
► Smallest unit► Values = zero or one
► One character► Eight bits
► One item within record► Example - last name
► Set of related fields► Example – employee #,
name, pay rate, etc.
► Set of related records
► Entire collection of files
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Chapter 1-22
The correct order of the computer data hierarchy is
a. byte, bit, record, field, file, database
b. bit, byte, record, field, file, database
c. bit, byte, field, record, file, database
d. bit, byte, field, record, database, file
Process Throughout the Supply ChainProcess Throughout the Supply ChainProcess Throughout the Supply ChainProcess Throughout the Supply Chain
Review Question
SO 5 Basic computer and IT concepts
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Chapter 1-23
Basic Computer and IT ConceptsBasic Computer and IT ConceptsBasic Computer and IT ConceptsBasic Computer and IT Concepts
SO 5 Basic computer and IT concepts
RelationalRelationalDatabaseDatabase
Master FileMaster File
Transaction Transaction FileFile
Example - relationship in data of a customer having more than one order.
Example - payroll master file maintains the relatively permanent data to process payroll transactions.
Example - transaction file is processed against the master file, and year-to-date balances are updated in the master file.
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Chapter 1-24
► Sequential access
► Random access
► Indexed Sequential Access Method (ISAM)
► Batch processing
► Online processing
► Real-time processing
File Access and Processing Modes
Basic Computer and IT ConceptsBasic Computer and IT ConceptsBasic Computer and IT ConceptsBasic Computer and IT Concepts
SO 5 Basic computer and IT concepts
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Chapter 1-25
► Data warehouse
► Operational database
► Data mining
Data Warehouse and Data Mining
Basic Computer and IT ConceptsBasic Computer and IT ConceptsBasic Computer and IT ConceptsBasic Computer and IT Concepts
SO 5 Basic computer and IT concepts
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Chapter 1-26
The process of searching for identifiable patterns in data is called
a. Sequential processing
b. data warehousing
c. data mining
d. real-time processing
Process Throughout the Supply ChainProcess Throughout the Supply ChainProcess Throughout the Supply ChainProcess Throughout the Supply Chain
Review Question
SO 5 Basic computer and IT concepts
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Chapter 1-27
Network (two or more computers linked together)
Types important to accounting:
► Local Area Network (LAN)
► Internet
► Intranet
► Extranet
Networks and the Internet
Basic Computer and IT ConceptsBasic Computer and IT ConceptsBasic Computer and IT ConceptsBasic Computer and IT Concepts
SO 5 Basic computer and IT concepts
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Chapter 1-28
The Real WorldThe Real WorldThe Real WorldThe Real World
The American Institute of Certified Public Accountants recently released the results
of its 2012 Top Technology Initiatives Survey. The survey asked respondents to
rank their organization’s top IT goals for the coming year. The top five responses
were:
1. Securing the IT environment
2. Managing and retaining data
3. Managing risks and compliance
4. Ensuring privacy
5. Leveraging new technologies (such as cloud computing and mobile
devices)
These findings clearly indicate that the ability to access key information is a top
priority for accountants. However, changing technologies tend to cause accountants
to rethink the way they work. The more that can be learned about the capabilities of
emerging technologies, the more likely it is that they will be appropriately integrated
into the IT environment to produce an improved result. Complete survey results are
available at aicpa.org/toptech.
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Chapter 1-29
Examples of IT EnablementExamples of IT EnablementExamples of IT EnablementExamples of IT Enablement
SO 6 Examples of IT enablement
Encompasses all forms of:
► Online electronic trading
► Consumer-based e-commerce
► Business-to-business transactions
► Internal use of IT
Examples, buying:a book at Amazon.comclothes at Landsend.com
E-Business
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Chapter 1-30
Electronic Data Interchange (EDI)
Examples of IT EnablementExamples of IT EnablementExamples of IT EnablementExamples of IT Enablement
SO 6 Examples of IT enablement
The intercompany, computer-to-computer transfer of business documents in a standard business format.
Example: Transmit purchase orders, invoices, and payments electronically between trading partners.
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Chapter 1-31
Point of Sale System
Examples of IT EnablementExamples of IT EnablementExamples of IT EnablementExamples of IT Enablement
SO 6 Examples of IT enablement
A system of hardware and software that captures retail sales transactions by standard bar coding.
Example: Customer checks out through the cash register, bar codes are scanned on the items purchased, prices are determined by access to inventory and price list data, sales revenue is recorded, and inventory values are updated.
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Chapter 1-32
Automated Matching
Examples of IT EnablementExamples of IT EnablementExamples of IT EnablementExamples of IT Enablement
SO 6 Examples of IT enablement
A computer system in which the software matches an invoice to its related purchase order and receiving report.
Example: Ford Motor Company described in text illustrated an automated matching system.
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Chapter 1-33
Evaluated Receipt Settlement (ERS)
Examples of IT EnablementExamples of IT EnablementExamples of IT EnablementExamples of IT Enablement
SO 6 Examples of IT enablement
An invoice-less system in which computer software completes an invoice-less match that is a comparison of the purchase order with the goods received.
E-Payables and Electronic Invoice Presentment and Payment (EIPP)
Web-enabled receipt and payment of vendor invoices.
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Chapter 1-34
Enterprise Resource Planning Systems (ERP)
Examples of IT EnablementExamples of IT EnablementExamples of IT EnablementExamples of IT Enablement
SO 6 Examples of IT enablement
Multi-module software system designed to manage all aspects of an enterprise.
Usually broken down into modules such as
► inventory management,
► manufacturing, and
► human resources.
► financials,
► sales,
► purchasing,
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Chapter 1-35
An IT enabled system for purchasing that is an “invoice-less” system is called a(n)
a. automated matching system
b. evaluated receipt settlement
c. e-payables
d. point of sale system
Process Throughout the Supply ChainProcess Throughout the Supply ChainProcess Throughout the Supply ChainProcess Throughout the Supply Chain
Review Question
SO 6 Examples of IT enablement
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Chapter 1-36
Internal Control Structure of OrganizationsInternal Control Structure of OrganizationsInternal Control Structure of OrganizationsInternal Control Structure of Organizations
SO 7 The internal control structure of organizations
Risks that impact financial standing:
1. Assets will be stolen or misused
2. Errors in accounting data or information
3. Fraudulent activity
4. Risks inherent in IT systems, such as
a. Erroneous input of data
b. Erroneous processing of data
c. Computer fraud
d. Erroneous input of data
e. Hardware or software failure
f. Natural disasters
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Chapter 1-37
Enterprise Risk Management (ERM)
ERM is defined as
. . . a process, effected by an entity’s board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.
SO 7 The internal control structure of organizations
Internal Control Structure of OrganizationsInternal Control Structure of OrganizationsInternal Control Structure of OrganizationsInternal Control Structure of Organizations
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Chapter 1-38
Enterprise Risk Management (ERM)
Requires management set policies and procedures related to:
► Internal Environment
► Objective Setting
► Event Identification
► Risk Assessment
SO 7 The internal control structure of organizations
Internal Control Structure of OrganizationsInternal Control Structure of OrganizationsInternal Control Structure of OrganizationsInternal Control Structure of Organizations
► Risk Response
► Control Activities
► Information and Communication
► Monitoring
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Chapter 1-39
Management should ensure the following types of control
structures exist:
1. Code of Ethics (Chapter 3)
2. COSO Accounting Internal Control Structure (Chapter 3)
3. IT Controls (Chapter 4)
4. Corporate Governance (Chapter 5)
5. IT Governance (Chapter 6)
SO 7 The internal control structure of organizations
Internal Control Structure of OrganizationsInternal Control Structure of OrganizationsInternal Control Structure of OrganizationsInternal Control Structure of Organizations
Enterprise Risk Management (ERM)
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Chapter 1-40
c. “Corporate Governance”
The COSO report written for the purpose of assisting managers in the challenge of managing risk in their organizations is entitled
a. “Internal Controls—Integrated Framework”
b. “Enterprise Risk Management—Integrated Framework”
d. “IT Governance”
SO 7 The internal control structure of organizations
Internal Control Structure of OrganizationsInternal Control Structure of OrganizationsInternal Control Structure of OrganizationsInternal Control Structure of Organizations
Review Question
Advance slide in presentation mode to
reveal answer.
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Chapter 1-41
The Real WorldThe Real WorldThe Real WorldThe Real World
On April 20, 2010, an explosion aboard the Deep Water Horizon drilling platform forced millions of gallons of oil to spill into the Gulf of Mexico, wreaking havoc on marine life and upsetting the coastal economies. This event and the related problems have been disastrous for BP plc, the company most frequently blamed for this tragedy.
This example illustrates how critical it is for companies to manage risks. Risks lie in nearly every aspect of every business, and the task of identifying and mitigating them is a daily challenge. Certainly, any oil company would include an explosion, oil spill or oil leak to be among its most serious risks. In the case of BP and the other responsible companies, there were evidently breakdowns in the monitoring of controls surrounding this location.
Although many people are familiar with the BP oil spill, most have probably never considered the accounting implications of this disaster. Yet years after its occurrence, BP was still struggling to account for the damages owed for environmental clean-up and legal claims, and its audit firm was still using cautionary language in the audit opinion accompanying BP’s financial statements.
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Chapter 1-42
Accountants may be
► Users of the AIS,
► Part of the design or implementation team of an AIS,
and/or
► Auditors of an AIS.
Importance of AIS to Accountants Importance of AIS to Accountants Importance of AIS to Accountants Importance of AIS to Accountants
SO 8 The importance of accounting information systems to accountants
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Chapter 1-43
c. auditor
Accountants have some form of use of the AIS in all but which role?
a. user
b. programmer
d. designer
SO 8 The importance of accounting information systems to accountants
Review Question
Importance of AIS to Accountants Importance of AIS to Accountants Importance of AIS to Accountants Importance of AIS to Accountants
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Chapter 1-44
Examples of potential unethical behaviors:
► Fraudulent financial reporting
► Revenue inflation
► Expense account fraud
► Inflating hours worked for payroll purposes
► Computer fraud
► Hacking
► Browsing confidential data
Relation of Ethics to AISRelation of Ethics to AISRelation of Ethics to AISRelation of Ethics to AIS
SO 9 The relation of ethics to accounting information systems
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Chapter 1-45
Which of the following is not true of unethical behavior?
a. The only category of unethical behavior for accountants is inflating revenue.
Ethics and the AISEthics and the AISEthics and the AISEthics and the AIS
SO 9 The relation of ethics to accounting information systems
b. Accountants are often pressured to help commit or cover up unethical behavior.
c. Hacking is an unethical behavior that accountants should be concerned about.
d. An accounting information system can be used to cover up unethical behavior.
Review Question
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Chapter 1-46
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