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INFORMATION

SYSTEMS CONTROL
AND AUDIT
(CA Final - Nov 14)
U-186, Lane No. 4, Shakarpur, Vikas Marg, Delhi - 110092
Ph: + 91-9999810262, 8510045779 E: info@kiaraeducomp.com
https://www.facebook.com/KiaraEduComp
CA Vikram Kapoor
B.Com, FCA, CIA, ISA (India Rank 2), CISA, CFE, NCFM
Information Systems Control and Audit (CA Final)
CA Vikram Kapoor

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Dedicated to
my mother Smt. Kiran Kapoor
and my uncle Sh. Deepak Gulati,
whose Ideals I follow
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CA Vikram Kapoor

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About the Author

CA Vikram Kapoor is a Fellow Chartered Accountant, having a post
qualification experience of almost 10 years in various firms.

His experience commenced after qualification as a Chartered Accountant in
January 2004 with Grant Thornton, one of the largest non-Big 4 consulting
firms in the Management Assurance and Risk Services division. After
working for over two years in Grant Thornton, he moved on to Ernst &
Young, a Big 4 consulting firm, wherein he was a part of the Risk and Business Services. Prior to
joining practice, he had a two year stint with American Express, one of the largest BPOs in the
country. He has worked with people from different communities, cultures, aspirations and
skills.

During the last 10 years, he has gained considerable experience in the domains of Finance, Audit
and Technology. He has obtained various professional qualifications including Certified
Internal Auditor (CIA). He has also completed two premier certifications in the field of IT audit
namely Certified Information Systems Auditor (CISA) conducted by the Information Systems
Audit and Control Association, US and the Information Systems Auditor (ISA) conducted by
ICAI, having secured All India Rank 2. He is also a Certifiied Fraud Examiner (CFE). He has
also done NSEs certification in Financial Markets.

He has been an active contributor to the CA profession, and has been rendering valuable
services to the CA fraternity. He was a member of the Study Material Research Group of
Northern India Regional Council (NIRC) of the Institute of Chartered Accountants of India for
the year 2009-10, and a member of Professional Development Advisory Group of NIRC of ICAI
for the year 2011-12.

He was also awarded Certificate of Appreciation by the NIRC of ICAI in December 2011, for
services rendered as a Faculty member of Revisionary classes of CA final course organized by
the NIRC.
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CA Vikram Kapoor

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Contents

Chapter Chapter Name
1 Information Systems Concepts
2
Acquisition, Development and Implementation of Information
Systems
3 Protection of Information Systems
4 Business Continuity Planning and Disaster Recovery Planning
5 Auditing of Information Systems
6 Concept of Government and Management of Information Systems
7 Information Technology Regulatory Issues
8 Emerging Technologies

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INFORMATION
SYSTEMS
CONCEPTS
Chapter 1
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Chapter 1 - Information System Concepts

Topic 1.1 Systems, Information, Information Systems and CBIS
Topic 1.2 Different Types of Information systems
Topic 1.3 Information as a Key Business Asset
Topic 1.4 Application of Information Systems in Enterprise Processes

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Topic 1.1 Systems, Information and Information Systems

(A) Definitions

What is a system?
The term system may be defined as a group of interconnected elements working towards the accomplishment
of a common goal by accepting inputs and producing outputs in an ordered transformation process
For instance, a manufacturing company is a system where economic resources such as people, money,
material, machines, etc are transformed by various organizational processes (such as production, marketing,
finance etc.) into goods.

What is information?
Information is data that have been put into a meaningful and useful
context, and is of real or perceived value in current or progressive decision.
For example, data regarding sales by various salesmen can be merged to
provide information regarding total sales through sales personnel. This
information is of vital importance to a marketing manager who is trying to
plan for future sales.
The terms Data and Information are used interchangeably. However, the
relation of data to information is that of raw materials to finished product.

What is information system?
Information Systems is a set of interrelated elements that operate collectively to accomplish the common
purpose or goal of providing information.
It is a collection of people, hardware, software, data procedure that interact to provide timely information to
authorized people who need it.

What is Computer Based information system?
A Computer Based Information System (CBIS) is a combination of people, IT and
business processes that helps management in taking in taking important decisions
to carry out the business successfully.

(B) General model of a information system/ Functions of a Information System
A general model of a information system consists of inputs, process, outputs,
storage and feedback.
Input is the data flowing into the
system from outside.
Processing is the action of
manipulating the input into a more
useful from.
Output is the information flowing out
of a system.
Storage is the means of holding
information for use at a later date.
Feedback occurs when the outcome has an influence on the input.




Storage
Feedback
Processing Input Output
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{This is the first case of a question based on the Input - Processing - Output concept}

(C) Steps followed in an information system
Input step - Data is collected from within the organization or from external environment and converted into a
suitable format required for processing.
Processing step - Then the conversion of these inputs happens which transforms the input data into a more
meaningful form i.e. information.
Output step - In this step, the output generated is either communicated to the user or stored for future use.

{This is the second case of a question based on the Input - Processing - Output concept}

(D) Classification (Nature and types) of systems
We can distinguish systems on the basis of following parameters:












1. According to elements Abstract system vs. Physical system)
(Element means a fundamental and essential constituent of an entity)
Open System Abstract system (or conceptual system or model system or Intangible system) - is an orderly
arrangement of interdependent ideas. An abstract system or a model is a representation of a real or a planned
system. The use of models makes it easier for the analyst to visualize relationships in the system under study.
An example of Procurement System








A physical system is a set of elements which operate together to accomplish an objective. Physical systems are
tangible entities. Examples of physical systems are (a) Transportation systems and (b) Computer Systems.
Thus physical systems are more than just the conceptual abstract, and, they display activity or behavior.
{Abstract Systems are also referred as Business Models, SOPs or Flowcharts}



Nature and Types of
systems
Elements
Interactive
Behavior
Abstract
Physical
Open
Closed
Human
Intervention
Manual
Automated
Working/
Output
Deterministic
Probabilistic
Purchase Indent
received
by Purchase
Manager
from Production
Planning and
Control Department
3 copies of POs are
generated by
Purchasing
Official for placing
order with the
supplier
PO verified by
Purchase Manager
1 copy of PO to
Supplier
1 copy to Accounts
1 copy filed
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2. According to Interactive Behaviour - Open system and Closed system
Open System - A system that interacts freely with its environment by taking input
and returning output is termed as an open system. With change of environment,
an open system also changes to match itself with the environment.
Information systems are a type of Open systems, as they interact freely
with the environment by accepting inputs from the environment and sending outputs to the
environment.
Closed system - A system that does not interact with the environment nor changes with
the change in environment is termed as a closed system.
For example, consider a 'throw-away' type sealed digital watch. This watch is a
closed system as it is completely isolated from its environment for its operation.
Such closed systems will finally run down or become disorganized.

Why are organizations considered to be relatively open systems?
Organizations are considered to relatively open systems, as they continuously interact with the external
environment, by processes or transformation of inputs into useful output.
Organizations are open systems, because they are input-output systems. The input consists of finance,
physical & mental labour and raw material. Organizations perform several operations on these inputs
and process out products or services. The process of exchange generates some surplus, in the form of
profit, goodwill experience and so on, which can be retained in the organization and can be used for
further input output process.
Organizations are dependent upon their external environment for the inputs required by them and for
disposing of their outputs in a mutually beneficial manner.

3. According to degree of Human Intervention - Manual vs. Computer based
Manual system - where data collection, manipulation, maintenance and final reporting are
carried out absolutely by human efforts.
Automated systems - where computers or microprocessors are used to
carry out all the tasks mentioned above. However it will be wrong to
say that a business system is 100% automated; rather, to some extent,
it depends on manual intervention, may be in a negligible way.

4. According to working/ output - Deterministic and Probabilistic system
A deterministic system operates in a predictable manner. The interaction among the parts is known with
certainty. If one has a description of the state of the system at a given point in time plus a description of its
operation, the next state of the system may be given exactly, without error. An example is a correct computer
program, which performs exactly according to a set of instructions.
The probabilistic system can be described in terms of probable behaviour, but a certain degree of error is
always attached to the prediction of what the system will do. An inventory system is an example of a
probabilistic system. The average demand, average time for replenishment, etc, may be defined, but the exact
value at any given time is not known.

Q Qu ue es st ti io on n 1 1: : I Id de en nt ti if fy y a an nd d j ju us st ti if fy y t th he e f fo ol ll lo ow wi in ng g s sy ys st te em ms s o on n h ho ow w t th he ey y p pe er rf fo or rm m w wi it th hi in n a an n e en nv vi ir ro on nm me en nt t a an nd d c ce er rt ta ai in nt ty y: :
M Ma ar rk ke et ti in ng g, , C Co om mm mu un ni ic ca at ti io on n, , M Ma an nu uf fa ac ct tu ur ri in ng g, , P Pr ri ic ci in ng g, , a an nd d H Ha ar rd dw wa ar re e- -s so of ft tw wa ar re e. . [ [I IC CA AI I Q Qu ue es st ti io on n - - N No ov v
2 20 00 09 9 - - 5 5 m ma ar rk ks s] ]

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(E) Components/ Elements of Information Systems
Such a system consists of the following elements:

1. Hardware
The term hardware refers to machinery including the computer itself, which is often referred as Central
Processing Unit (CPU) and all of its support equipment. Among the support equipment are input and
output devices, storage devices, and communications devices.


2. Software
The term software refers to the computer programs. Computer programs are machine-readable instructions
that direct the circuitry within the hardware parts of the Computer Based Information Systems to function in
ways that produce useful information from data.

3. Data
Data are facts that are used by programs to produce useful information. Like programs, data are generally
stored in machine-readable form on disk or tape until the computer needs them.

4. Procedures
Procedures are the policies that govern the operation of a computer system. For instance, the steps that must
be taken to enter a password and log onto computer terminal are a procedure. The actions needed to restore
the computer system to its operational state after a major failure is another example of a procedure.
Procedures often specify the actions that people should take in a step-by-step manner.

5. People
Every Computer Based Information System needs people if it is to be made useful. People are probably
the components that influence the success or failure of information systems the most. Users, programmers,
system analysts, and database administrators are just some of the people associated with the computer-
based information systems.

(F) Characteristics of CBIS
All systems work for predetermined objectives and the system is designed and developed accordingly.
In general a system has a number of interrelated and interdependent subsystems or components. No
subsystem can function in isolation; it depends on other subsystems for its inputs.
If one subsystem or component of a system fails, in most cases the whole system does not work. However, it
depends on how the subsystems are interrelated.
The way a subsystem works with another subsystem is called interaction. The different subsystems interact
with each other to achieve the goal of the system.
The work done by individual subsystems is integrated to achieve the central goal of the system. The goal of
individual subsystem is of lower priority than the goal of the entire system.

Q Qu ue es st ti io on n 2 2: : C Ch ha ar ra ac ct te er ri is st ti ic cs s o of f a a C Co om mp pu ut te er r B Ba as se ed d I In nf fo or rm ma at ti io on n S Sy ys st te em m. . [ [I IC CA AI I Q Qu ue es st ti io on n - - M Ma ay y 2 20 01 11 1 - - 4 4 m ma ar rk ks s] ]

{This question maybe asked as Characteristics of a Business System also.}

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(G) Major areas of CBIS
Major areas of CBIS have been listed below:
Inventory Management
(Stores Management)
Production (Manufacturing)
Marketing and Sales
Finance and Accounting
Human Resources Management


1. Inventory Management
(Stores Management)
The inventory management system is
designed with a view to keeping track of
materials in the stores.
It is used to regulate the following aspects of inventory:
Maximum and minimum level of stocks
Raising alarm at danger level stock of any material
Give timely alerts for re-ordering of materials with optimal re-order quantity
It also facilitates certain queries about inventory such as
Total inventory value at any time
Identification of important items in terms stock value (ABC analysis)
Identification of most frequently moving items (XYZ analysis) etc.
Similarly well-designed inventory management system for finished goods and semi-finished goods provides
important information for production schedule and marketing/sales strategy.

2. Production (Manufacturing)
The objective of this subsystem is to optimally deploy men, machines and materials to maximize production
or service.
The system generates production schedules and schedules of material requirements
It monitors the product quality and also helps in overhead cost control and waste control.
It monitors plans for replacement or overhauling the machinery.

3. Marketing and Sales
The objective of this subsystem is
to maximize sales and ensure
customer satisfaction.
The marketing system increases
the chances of order
procurement by facilitating the
marketing of products of the
company, and facilitating
creating of new customers and
advertising of products.
The sales department may use the system to keep status and track of orders and generate bills for the orders
executed and delivered to the customer.
It may facilitate the rendering of services during warranty period and beyond.
It may also analyze the sales data by category such as by region, product, salesman or sales value.
Major Areas
of CBIS
Inventory
Management
Marketing
and Sales
Finance and
Accounting
Production
Human
Resources
Marketing of products
Creating customers
Advertising products
Compute commissions
for dealers or salesmen
Keep track of orders
Generate bills
Rendering of warranty
services
Analyze sales data
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The system may also be used to compute commissions for dealers or salesmen and thus helps the
corporate managers to take decisions in many crucial areas.

4. Finance and Accounting
The main goal of this system is to ensure financial viability of the organization, enforce financial discipline
and plan and monitor the financial budget.
It helps forecasting revenues, determining the best resources and uses of funds and managing other financial
resources.
Typical sub-application areas in finance and accounting are:
Financial accounting and Balance Sheet
Accounts receivable/payable
Asset accounting
Investment management
Cash management
Treasury management

5. Human Resources Management
Human resource is the most valuable asset for an organization. Utilization of this resource in most effective
and efficient way is an important function for any enterprise. Human resource management system aims to
achieve the goal of less disputes and right utilization of manpower. Following sub-modules of HRM system
help in achieving the said objectives:
Skill database with details of qualifications, training, experience, interests etc helps management for
allocating manpower to right activity at the time of need or starting a new project. This system also
keeps track of employees output or efficiency.
Administrative functions like keeping track of leave records or handling other related functions are also
included HRM system.
An HRM system may also have other modules such as Personnel administration; Recruitment
management; Travel management; Benefit administration; Salary administration; Promotion
management etc.

{It may be noted that these systems are also known as Departments, Divisions, Business Functions, Functional Areas,
Operational Areas, and Business Processes}

Q Qu ue es st ti io on n 3 3: : Y Yo ou u a ar re e a ap pp po oi in nt te ed d a as s F Fi in na an nc ce e C Co on nt tr ro ol ll le er r o of f a a c co om mp pa an ny y. . A As s p pa ar rt t o of f y yo ou ur r i in ni it ti ia at ti iv ve es s t to o s st tr re en ng gt th he en n t th he e
I In nf fo or rm ma at ti io on n p pr ro oc ce es ss si in ng g c ca ap pa ac ci it ty y o of f y yo ou ur r c co om mp pa an ny y, , y yo ou u d de ec ci id de e t to o i im mp pl le em me en nt t C Co om mp pu ut te er r B Ba as se ed d I In nf fo or rm ma at ti io on n
S Sy ys st te em ms s i in n d di if ff fe er re en nt t d do om ma ai in ns s. . W Wh ha at t a ar re e t th he e d di if ff fe er re en nt t a ar re ea as s i in n w wh hi ic ch h t th he e C CB BI IS S c ca an n b be e i im mp pl le em me en nt te ed d? ?
E El la ab bo or ra at te e o on n t th he e s sy ys st te em m w wh hi ic ch h d de ea al ls s w wi it th h t th he e H Hu um ma an n R Re es so ou ur rc ce e a as sp pe ec ct t o of f t th he e c co om mp pa an ny y. .

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Topic 1.2 Different Types of Information systems

Different types of Information systems have been drawn below:



Operation Support Systems

Operation Support Systems: These are Information Systems designed to improve the operational efficiency of
the enterprise. These systems primarily are concerned with the operations, and use internal data primarily for
managers at the lower levels.

IS Type I. Transaction Processing System (TPS)

(A) Basic Concepts
TPS is an information system at the lowest level of management that manipulates data from business
transactions.
A transaction is an agreement, communication, or movement carried out between separate entities or objects,
often involving the exchange of items of value, such as information, goods, services, and money. For
instance, a financial transaction between two companies.
Any business activity such as sales, purchase, production, delivery, payments or receipts involves transaction
and these transactions are to be organized and manipulated to generate further information. For example,
selling of a product to a customer will give rise to the need of further information like customer billing,
updating inventory status and increasing in account receivable balance. Transaction processing system will
thus record and manipulate transaction data into usable information.
Information systems
Operations
Support Systems
Management
Support Systems
Office
Automation
Systems
Transaction
Processing Systems
Process Control
Systems
Enterprise
Collaboration
Systems
Management
Information Systems
Executive Information
Systems
Decision Support
Systems
Text Processing
Systems
Electronic Message
Communication
Systems
Electronic Document
Management Systems
Teleconferencing and
Video-conferencing
Systems
Expert Systems
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A transaction processing system may follow periodic data preparation and batch processing (as in payroll
application) or on-line processing (as in inventory control application).
It is to be noted that the people who participate in Transaction processing system usually are not in a position
to take any management decision.

(B) An illustration of Sales Transaction Processing System






(C) Activities undertaken in a TPS
Typically, a TPS involves the following activities:
1. Capturing data to organize in files or databases.
2. Processing of files / databases using application software.
3. Generating information in the form of reports.
4. Processing of queries from various quarters of the organization

(D) Components of TPS (Similar to Components of System studied above)
Inputs: Source documents, such as Purchase orders, Customer orders or sales slips, Invoices, and Employee
time cards are the physical evidence of inputs into the Transaction Processing System. They not only service
the main purpose of capturing data, but also serve other purposes like standardizing operations by indicating
which data is required to be recorded and also provide a permanent file for future reference.
Processing: This involves the use of journals and registers to provide a permanent and chronological record of
inputs. Journals are used to record financial accounting transactions, and registers are used to record other
types of data not directly related to accounting. Some of the more common special journals are sales journal,
purchase journal, cash receipts journal etc.
Storage: Ledgers and files provide storage of data on both manual and computerized systems.
Output: Any document generated in the system is output. For example:
A customer invoice is an output from the order-entry application system.
Similarly, Trial Balance is an output from and Accounting system, which lists the balances of all
accounts.

{This is the third case of a question based on the Input - Processing - Output concept}

(E) Features of TPS
Large volume of data: As TPS is transaction oriented, it generally consists large volumes of data and thus
require greater storage capacity.
Automation of basic operations: Any TPS aims at automating the basic operations of a business
enterprise and plays a critical role in the day-to-day functioning of the enterprise. Any failure in the TPS for a
short period of time can play havoc with the functioning of the enterprise.
Benefits are easily measurable: TPS reduces the workload of the people associated with the operations
and improves their efficiency by automating some of the operations. Most of these benefits of the TPS
are tangible and easily measurable.
Source of input for other systems: TPS is the basic source of internal information for other information
systems such as Management Information Systems and Decision Support Systems.

Scan Product Code +
Update Stock File
(Processing)
Receiving Customer
Order (Input)
Issuing Customer
Invoice (Output)
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Q Qu ue es st ti io on n 4 4: : D De ef fi in ne e T Tr ra an ns sa ac ct ti io on n P Pr ro oc ce es ss si in ng g S Sy ys st te em ms s. . L Li is st t o ou ut t t th he e s sa al li ie en nt t f fe ea at tu ur re es s o of f a a T TP PS S. . [ [I IC CA AI I Q Qu ue es st ti io on n - -
N No ov v 2 20 01 13 3 - - 6 6 m ma ar rk ks s] ]

IS Type II. Process Control Systems (PCS)

In this type of system, computer is used to control ongoing physical processes.
The computers are designed to make decisions automatically, which then adjusts the physical production
process.
For example, the systems which control assembly lines in automated factories.

IS Type III. Enterprise Collaboration Systems (ECS)

These technologies use a variety of technologies to help people work together.
It supports collaboration to communicate ideas, share resources and co-ordinate co-operative work efforts.
Its objective is to use IT to enhance the productivity and creativity of teams in enterprises.

Management Support Systems

Management Support Systems (MSS) are information systems which support managers in effective decision
making by providing relevant and required information at the right time to the right people..

IS Type IV. Management information systems (MIS)

(A) Definition of Management Information System (MIS)
MIS is an integrated user-machine system designed for providing information to support operational control,
management control and decision making functions in an organization.
The information system makes use of resources such as hardware, software, personnel, procedure and
supplies as well.
MIS is designed to provide relevant and timely information to managers at different levels and in different
functional areas throughout the organization for decision-making purpose.
MIS supports the managers at different levels to take strategic (at top level) or tactical (at middle level)
management decisions to fulfill the organizational goals.

(B) Component of MIS (Management + Information + System)

Management
Information Management Information System
Systems

Management = the processes or activities that describe what managers do in the operation of their
organization such as
Determination of organizational objectives and developing plans to achieve them.
Securing and organizing the human and physical resources so that these objectives could be
accomplished.
Exercising adequate controls over the functions, and
Monitoring the results to ensure that accomplishments are proceeding according to plan.
Information = sets of facts, figures and symbols processed for the current decision-making situation.
System = Set of interrelated elements that operate collectively to accomplish some common purpose or goal.
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Management Information System = Management + Information + System, i.e. Set of interrelated elements that
operate collectively to accomplish the common purpose or goal of providing information to the managers.

Q Qu ue es st ti io on n 5 5: : E Ex xp pl la ai in n t th he e c co on nc ce ep pt t o of f M MI IS S i in n t te er rm ms s o of f i it ts s t th hr re ee e e el le em me en nt ts s. .

(C) Characteristics of an effective MIS
1. Management oriented (oriented means tilting towards)
Development of the Management Information System should start from an appraisal of management needs
and overall business objectives.
Such a system is not necessarily for top management only, it may also meet the information requirements of
middle level or operating levels of management as well.

2. Management directed
Management should actively direct the development efforts of the Management Information System.
It is necessary for management to devote their sufficient time not only at the stage of designing the system but
for its review as well, to ensure that the implemented system meets the specifications of the designed system.

3. Heavy planning element
An MIS usually takes 3 to 5 years and sometimes even longer period to get established firmly within a
company. Therefore, a heavy planning element must be present in MIS development.
It means that MIS designer should keep in view future objectives and requirements of firm's information in
mind. The designer must avoid the possibility of system obsolescence before the system gets into operation.

4. Common database
Database is defined as a "superfile" which consolidates and integrates data records formerly stored in many
separate data files.
The organization of a database allows it to be accessed by several information sub-systems and thus,
eliminates the necessity of duplication in data storage, updating, deletion and protection.

5. Common data flows
It means the use of common input, processing and output procedures and media whenever possible is
desirable.
Once the data has been captured by the Information System, there should be minimum data processing
procedures to process the data.

6. Integrated
Development of the Management Information System should be an integrated one.
It means that all the functional and operational information sub-systems should be tied together into one
entity.

7. Sub system concept
Even though the information system is viewed as a single entity, it must be broken down into sub-systems
which can be implemented one at a time by developing a phasing plan.
The breaking down of MIS into meaningful sub-systems sets the stage for this phasing plan.

8. Computerized
It is possible to have MIS without using a computer. But use of computers increases the effectiveness of the
system.
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In fact, its use equips the system to handle a wide variety of applications by providing their information
requirements quickly.
Other necessary attributes of the computer to MIS are accuracy and consistency in processing data and
reduction in clerical staff. These attributes make computer a prime requirement in management information
system.

{To remember. Management = Oriented, Directed, Heavy Planning. Information = Common database, Common data
flows. System = Integrated, Sub-system, Computerised}


Q Qu ue es st ti io on n 6 6: : D De es sc cr ri ib be e a an ny y s si ix x c ch ha ar ra ac ct te er ri is st ti ic cs s o of f a an n e ef ff fe ec ct ti iv ve e m ma an na ag ge em me en nt t i in nf fo or rm ma at ti io on n s sy ys st te em m. . [ [I IC CA AI I Q Qu ue es st ti io on n - - N No ov v
2 20 01 13 3 - - 6 6 m ma ar rk ks s] ]

(D) Pre-requisites of an effective MIS
1. Qualified system and management staff
MIS should be manned by qualified officers. These officers who are expert in the field should understand
clearly the views of their fellow officers. For this, the organizational management base should comprise of two
categories of officers viz. (1) Systems and Computer experts and (2) Management experts.
Systems and Computer experts in addition to their expertise in their subject area should also be
capable of understanding management concepts to facilitate the understanding of problems faced by
the concern. They should also be clear about the process of decision making and information
requirements for planning and control functions.
Management experts should also understand quite clearly the concepts and operations of a computer.
This basic knowledge of computers will be useful to place them in a comfortable position, while
working with systems technicians in designing or otherwise of the information system.

2. Support of Top Management
The management information system to be effective, should receive the full support of top management. The
reasons for this are as follows:
Subordinate managers are usually lethargic about activities, which do not receive the support of their
superiors (top management).
The resources involved in computer-based information systems are large and are growing larger in
view of importance gained by management information system.

3. Database
It is a collection of files, files being collection of records, and these records being collection of data.
It should be arranged in such a way that access to data is removed and redundancy is reduced.
The main characteristics of database are:
It is user oriented
It is capable of being used as a common date resource to various users.
It is available to authorized persons only.

4. Control and maintenance of MIS
Control of the MIS means the operation of the system as it was designed to operate. Some time, users develop
their own procedures or short cut methods to use the system, which reduce its effectiveness. To check such
habits of users, the management at each level in the organization should devise checks for the information
system control.

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5. Evaluation of MIS
An effective MIS should be capable of meeting the information requirements of its executives in future as well.
This capability can be maintained by evaluating the MIS on a periodic basis and taking appropriate timely
action.
The evaluation of MIS should take into account the following points.
Examining whether enough flexibility exists in the system, to cope with any expected or
unexpected information requirement in future.
Ascertaining the views of users and the designers about the capabilities and deficiencies of the
system.
Guiding the appropriate authority about the steps to be taken to maintain effectiveness of MIS.

(E) Misconceptions or Myths about MIS
MIS is about use of computers
MIS is a bunch of technologies
More data in reports means more information for managers
Accuracy in reporting is of vital importance
Any computer based information system is MIS
Any reporting system is MIS

(F) Constraints in operating a MIS
Major constraints which come in the way of operating an information system are the following:
Non-availability of experts, who can diagnose the objectives of the organization and provide a desired
direction for installing and operating system. This problem may be overcome by grooming internal staff. The
grooming of staff should be preceded by proper selection and training.
Problem of selecting the sub-system of MIS to be installed and operated upon. The criteria, which should
guide the experts here, may be the need and importance of a function for which MIS can be installed first.
Non-standardized approach for designing and implementing MIS. Though in this regard nothing can be done
at the initial stage but by and by standardization may be arrived at, for the organization in the same industry.
Non-availability of cooperation from staff in fact is a crucial problem. It should be handled tactfully.
Educating the staff may solve this problem. This task should be carried out by organizing lecturers, showing
films and also explaining to them the utility of the system. Besides this, some persons should also be involved
in the development and implementation of the system.

(G) Limitations of MIS
The quality of the outputs of MIS is basically governed by the quality of input and processes.
MIS is not a substitute for effective management. It means that it cannot replace managerial judgement in
making decisions in different functional areas. It is merely an important tool in the hands of executives for
decision making and problem solving.
MIS may not have requisite flexibility to quickly update itself with the changing needs of time, especially in
fast changing and complex environment.
MIS cannot provide tailor-made information packages suitable for the purpose of every type of decision made
by executives.
MIS takes into account mainly quantitative factors, thus it ignores the non-quantitative factors like morale and
attitude of members of the organization, which have an important bearing on the decision making process of
executives.
MIS is less useful for making non-programmed decisions. Such type of decisions are not of the routine type
and thus require information, which may not be available from existing MIS to executives.
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The effectiveness of MIS is reduced in organizations, where the culture of hoarding information and not
sharing with other holds.
MIS effectiveness decreases due to frequent changes in top management, organizational structure and
operational team.

Q Qu ue es st ti io on n 7 7: : L Li im mi it ta at ti io on ns s o of f M MI IS S [ [I IC CA AI I Q Qu ue es st ti io on n - - N No ov v 2 20 01 12 2 - - 4 4 m ma ar rk ks s] ]

Q Qu ue es st ti io on n 8 8: : A A c co om mp pa an ny y, , e en ng ga ag ge ed d i in n t th he e m ma an nu uf fa ac ct tu ur ri in ng g o of f t te ex xt ti il le e p pr ro od du uc ct ts s, , d de ec ci id de ed d t to o d de ev ve el lo op p a a r ro ob bu us st t M Ma an na ag ge em me en nt t
I In nf fo or rm ma at ti io on n S Sy ys st te em m, , t to o s su up pp po or rt t t th he e d de ec ci is si io on n m ma ak ki in ng g c ca ap pa ab bi il li it ti ie es s o of f i it ts s m ma an na ag ge er rs s. . D Du ur ri in ng g i im mp pl le em me en nt ta at ti io on n, ,
i it t r re ea al li iz ze ed d t th ha at t t th he er re e a ar re e s se ev ve er ra al l h hu ur rd dl le es s o on n t th he e w wa ay y t to o i im mp pl le em me en nt ta at ti io on n o of f a a s st tr ro on ng g M MI IS S. . W Wi it th h a ad de eq qu ua at te e
m ma an na ag ge em me en nt t s su up pp po or rt t, , i it t w wa as s a ab bl le e t to o f fi in na al ll ly y i im mp pl le em me en nt t M MI IS S. . H Ho ow we ev ve er r, , d do o y yo ou u t th hi in nk k t th ha at t o on nc ce e t th he e M MI IS S
h ha as s b be ee en n i im mp pl le em me en nt te ed d, , w wi il ll l i it t b be e a ab bl le e t to o s sa at ti is sf fy y a al ll l r re eq qu ui ir re em me en nt ts s o or r d do oe es s i it t h ha av ve e i it ts s o ow wn n l li im mi it ta at ti io on ns s? ?
C Co om mm me en nt t o on n t th he e s sa am me e. .

IS Type V. Decision Support Systems (DSS).

(A) Definition of DSS
Decision Support Systems (DSS) are a specific class of computerized information systems that support
business and organizational decision-making activities.
A decision support system (DSS) can be defined as a system that provides tools to managers to assist them in
solving semi structured and unstructured problems in their own, somewhat personalized, way.
Typical information that a decision support application might gather and present would be projected revenue
figures based on new product sales assumptions.
A DSS is not intended to make decisions for managers, but rather to provide managers with a set of
capabilities that enables them to generate the information required by them in making decisions. In other
words, a DSS supports the human decision-making process, rather than providing a means to replace it.

(B) An illustration (of Excel working as a DSS)









If a manager needs to know what would be the impact of changing sales on his profitability, he may use MS
Excel which allows him to work on various scenarios in decision making.

(C) Characteristics of DSS
DSS should support decision making for different levels of management.
They should be flexible enough to respond to the changing needs of decision makers, i.e. it should be able to
fit itself in the style of a particular manager and ready to change according to changes in requirement.
They should be easy to use. A user may not have expert knowledge of computer programming to generate
reports that help in decision making.
DSS should be extensible and evolve overtime.
DSS should focus on decision rather than data and information.

Particulars Scenario I Scenario II Scenario III
Sales 100,000 110,000 120,000
Variable Costs
(= 65% of Revenue)
65,000 71,500 78,000
Fixed Costs 20,000 20,000 20,000
Profit 15,000 18,500 22,000
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Q Qu ue es st ti io on n 9 9: : W Wh ha at t i is s a a D De ec ci is si io on n S Su up pp po or rt t S Sy ys st te em m? ? B Br ri ie ef fl ly y e ex xp pl la ai in n t th hr re ee e c ch ha ar ra ac ct te er ri is st ti ic cs s o of f a a D De ec ci is si io on n S Su up pp po or rt t S Sy ys st te em m. .
[ [I IC CA AI I Q Qu ue es st ti io on n - - N No ov v 2 20 00 08 8 - - 5 5 m ma ar rk ks s] ]

(D) Components of a DSS
A decision support system has four basic components
1. The user
2. One or more databases
3. Planning language, and
4. The model base

1. The users
Managers
The most common user of a decision support system is a manager with an unstructured or semi-
structured problem to solve.
The manager may be at any level of authority in the organization (e.g., either top management or
operating management).

Staff Specialists (Analysts)
These are the people who are more details oriented and willing to use complex systems in their day to
day work.

2. Databases
Decision support systems include one or more databases.
These databases contain both routine and non-routine data from both internal and external sources.
An organization often generates data from internal sources. For example, data from the financial and
managerial accounting systems such as account, transaction, and planning data.
The data from external sources include data about the operating environment surrounding an
organization - for example, data about economic conditions, market demand for the organizations
goods or services, and industry competition.

Implementation of database
Physical level: It involves the storage of data in the hard disk.
Logical Level: It deals with the nature of data stored and the scheme of the data. Storage is logically
divided into various tables having rows and columns.

3. Planning languages
Two types of planning languages that are commonly used in decision support systems are: (1) general -
purpose planning languages and (2) special-purpose planning languages.
General-purpose planning languages allow users to perform many routine tasks - for example,
retrieving various data from a database or performing statistical analyses. The languages in most
electronic spreadsheets are good examples of general-purpose planning languages. These languages
enable user to tackle a broad range of budgeting, forecasting, and other worksheet-oriented problems.
Special-purpose planning languages are more limited in what they can do, but they usually do certain
jobs better than the general-purpose planning languages. Some statistical languages such as SAS and
SPSS are examples of special purpose planning languages.



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4. Model base
The model base is the "brain" of the decision support system because it performs data manipulations and
computations with the data provided to it by the user and the database.
There are many types of model bases, but most of them are custom-developed models that do some types of
mathematical functions-for example, cross tabulation, regression analysis, time series analysis, linear
programming and financial computations.

(E) Examples of decision support systems in accounting
1. Cost Accounting system
Cost accounting system is a DSS which helps organizations to calculate product costs for individual
procedures or services in totality or per unit. These allow managers to measure the effectiveness of specific
operating processes.
These are used extensively in health care industry, as managing costs in health care industry require
controlling costs of supplies, expensive machinery, technology and a variety of personnel.

2. Capital Budgeting System
Companies require new tools to evaluate high-technology investment decisions. One of these tools is the
Decision support system, which provides support to managers by supplementing analytical techniques, such
as net present value and internal rate of return, with several decision support tools.
Using the decision support system, accountants, managers, and engineers can evaluate several investment
alternatives at once.
An example of a DSS designed for evaluating investments in automated manufacturing entities is AutoMan,
which allows decision makers to consider financial, non financial, quantitative and qualitative factors in their
decision making process.

3. Budget Variance Analysis System
Financial institutions rely heavily on their budgeting systems for controlling costs and evaluating managerial
performance. They use computerized decision support system to generate periodic (monthly, quarterly,
yearly) variance reports.
The system allows them to graph, view, analyze, and annotate budget variances.
This system also helps to create additional one and several years budget projections using the forecasting
tools provided in the system.

4. General Decision Support System
Unlike the above three Decision Support System which accomplish specific tasks, some planning languages
used in decision support systems are general purpose and therefore have the ability to analyze many different
types of problems.

(F) Difference between DSS and MIS

Dimensions of Difference Decision Support System Management Information System
Philosophy Providing integrated tools and
models to end users
Providing structured information to
end users
Orientation External Information Internal Information
Flexibility Highly flexible Relatively inflexible
Analytical capability More analytical capability Less analytical capability
Systems analysis Emphasis is more on Tools to be
used in decision process
Emphasis is more on Information
Requirement
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Dimensions of Difference Decision Support System Management Information System
Systems design Interactive process Based on static information
requirement

IS Type VI. Executive Information Systems (EIS)

An executive information system (EIS) is a DSS that is designed to meet the special needs of top-level
managers.
It is a tool that provides direct on-line access to relevant information in a useful and navigable format.

{It is impertinent to note here that the term EIS was coined in the early eighties when computers were not operated by
high level executives themselves, and they relied on the subordinates for supply of information. To overcome this,
development of Executive Information Systems was done to enable executives use computers on their own for extracting
information. Since the term was first introduced, the trend of executives having direct access to computers has
significantly grown.}

(A) Characteristics of EIS
EIS is a Computer-based-information system that serves the information need of top executives.
EIS enables users to extract summary data and model complex, problems without the need to learn query
languages statistical formulas or high computing skills.
EIS provides rapid access to timely information and direct access to management reports.
EIS is capable of accessing both internal and external data.
EIS provides extensive online analysis tool like trend analysis, market conditions etc.

Q Qu ue es st ti io on n 1 10 0: : W Wh ha at t i is s m me ea an nt t b by y E EI IS S? ? W Wh ha at t a ar re e i it ts s c ch ha ar ra ac ct te er ri is st ti ic cs s? ? [ [I IC CA AI I Q Qu ue es st ti io on n - - M Ma ay y 2 20 01 11 1 - - 4 4 m ma ar rk ks s, , N No ov v 2 20 01 12 2 - -
6 6 m ma ar rk ks s] ]

(B) Execution Decision Making Environment/ Characteristics of the types of information used in executive
decision making
In the Executive Decision Making Environment, the executives have to take several broad decisions. For this
they require information. These information generally possesses several characteristics. These have been
detailed below:
1. Lack of structure: Many of the decisions made by executives are relatively unstructured. For
instance, what general direction should the company take? So, it is not always obvious which
information is required or how to weigh available data when reaching a decision
2. Future orientation: Strategic-planning decisions are made in order to shape future events. As
conditions change, organisations must change also. Consequently, the information maybe
required for future trends etc. For example, questions like How will the future technologies affect
the companys growth?, What products will customers demand five years from now? etc require
such information which is future oriented.
3. Informal source: Information required by executives, more than other types of managers, relies
heavily on informal sources. For example, lunch with colleague in another firm might reveal some
important competitor strategies. Other sources of information are meetings, brainstorming with a
colleague, social events, media etc.
4. Low level of detail: Most important executive decisions are made by observing broad trends. This
requires the information to be focusing on large overview than the tiny items.
5. High degree of uncertainty: Executives work in a decision space where results are not scientifically
predictable from actions. For instance, information about pricing may not necessarily ensure the
result that product demand will increase.
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Q Qu ue es st ti io on n 1 11 1: : D Di is sc cu us ss s a an ny y t th hr re ee e o of f t th he e c ch ha ar ra ac ct te er ri is st ti ic cs s o of f t th he e t ty yp pe es s o of f i in nf fo or rm ma at ti io on n u us se ed d i in n E Ex xe ec cu ut ti iv ve e D De ec ci is si io on n M Ma ak ki in ng g. .
[ [I IC CA AI I Q Qu ue es st ti io on n - - M Ma ay y 2 20 01 10 0 - - 6 6 m ma ar rk ks s] ]

(C) Contents of EIS (Principles to guide the design on EIS)
A general answer to the question of what data is appropriate for inclusion in an Executive Information System
is whatever is interesting to executives". A practical set of principles to guide the design of measures and
indicators to be included in an EIS is presented below :
Data required for EIS should be collected naturally as part of the process of work. An EIS should not
add substantially to the workload of managers or staff.
Data in EIS should reflect the objectives of the organization in the areas of productivity, resource
management, quality and customer service.
Performance indicators in an EIS should be as independent as possible from variables outside
the control of managers.
EIS information must be available to higher executives in the organization. The objective is to provide
these executives with useful information about the organization's performance. Information
that must remain confidential should not be part of the EIS or the management system of the
organization.
EIS measures must evolve to meet the changing needs of the organization.

(D) Difference between Executive Information Systems and Traditional Information systems

Dimensions of Difference Executive Information System Traditional Information System
Level of management For top or near top executives For lower staff
Nature of information access Specific issues/ problems and
aggregate reports
Status reporting
Nature of information provided Online tools and analysis Offline status reporting
Information sources More external, less internal Internal
Drill down facility to go to details Available Not available
Information format Text with graphics Tabular
Nature of interface User friendly Computer operator generated

Q Qu ue es st ti io on n 1 12 2: : H Ho oe es s d do oe es s E Ex xe ec cu ut ti iv ve e I In nf fo or rm ma at ti io on n S Sy ys st te em m d di if ff fe er r f fr ro om m T Tr ra ad di it ti io on na al l I In nf fo or rm ma at ti io on n S Sy ys st te em m [ [I IC CA AI I Q Qu ue es st ti io on n - -
M Ma ay y 2 20 01 13 3 - - 4 4 m ma ar rk ks s] ]

IS Type VII. Expert Systems

(A) Definition
An Expert System is highly developed DSS that utilizes knowledge generally
possessed by an expert to share a problem.
Expert System are software systems that imitate the reasoning processes of human
experts and provide decision makers with the type of advice they would normally
receive from experts.
For instance, an expert system in the area of investment portfolio management
might ask its user a number of specific questions relating to investments for a
particular client such as
What is his monthly income?
How much of the income is required for routine expenses and how much is disposable?
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How much can be invested?
Does the client have any preferences regarding specific types of securities? And so on.
Based on these questions, the expert system may advice a investment pattern to the client.

(B) Examples of some Business Expert Systems
Accounting and Finance: It provides tax advice and assistance, helping with credit-authorization decisions,
selecting forecasting models, providing investment advice.
Marketing: It provides establishing sales quotas, responding to customer inquiries, referring problems to
telemarketing centers, assisting with marketing timing decisions, determining discount policies.
Manufacturing: It helps in determining whether a process is running correctly, analyzing quality and
providing corrective measures, maintaining facilities, scheduling job-shop tasks, selecting transportation
routes, assisting with product design and faculty layouts.
Personnel: It is useful in assessing applicant qualifications, giving employees assisting at filling out forms
General Business: It helps in assisting with project proposals, recommending acquisition strategies,
educating trainees, evaluating performance.

Q Qu ue es st ti io on n 1 13 3: : W Wr ri it te e s sh ho or rt t o on n B Bu us si in ne es ss s a ap pp pl li ic ca at ti io on ns s o of f E Ex xp pe er rt t S Sy ys st te em ms s f fo or r M Ma an na ag ge em me en nt t S Su up pp po or rt t S Sy ys st te em ms s. . [ [I IC CA AI I
Q Qu ue es st ti io on n - - M Ma ay y 2 20 01 11 1 - - 4 4 m ma ar rk ks s] ]

(C) Need for Expert Systems
Expert labor is expensive and scarce. Knowledge workers employee who routinely work with data and
information to carry out their day to day duties are not easy to find and keep and companies are often faced
with a shortage of talent in key positions.
Moreover, no matter how bright or knowledgeable certain people are, they often can handle only a few factors
at a time.

(D) Benefits of Expert Systems
Expert Systems preserve knowledge that might be lost through retirement resignation or death of an
acknowledged company expert.
Expert Systems put information into an active-form so it can be summoned almost as a real-life expert might
be summoned.
Expert Systems assist novices in thinking the way experienced professional do.
Expert Systems are not subject to such human fallings as fatigue, being too busy, or being emotional.
Expert Systems can be effectively used as a strategic tool is the areas of marketing products, cutting costs and
improving products.

Q Qu ue es st ti io on n 1 14 4: : B Be en ne ef fi it ts s o of f E Ex xp pe er rt t S Sy ys st te em ms s [ [I IC CA AI I Q Qu ue es st ti io on n - - N No ov v 2 20 01 10 0 - - 4 4 m ma ar rk ks s] ]

(E) Properties that Expert systems should posses
Domain: The domain, or subject area, of the problem is relatively small and limited to a relatively well-defined
problem area.
Expertise: Solutions to the problem require the efforts of experts, and their expertise i.e. knowledge and
techniques should be available.
Complexity: Solution of the problems for which the Expert Systems will be used is a complex task that
requires logical inference processing, which would not be easily handled by conventional information
processing.
Structure: The solution process must be able to cope with ill-structured, uncertain, missing, and conflicting
data, and a dynamic problem-solving situation.
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Q Qu ue es st ti io on n 1 15 5: : W Wh ha at t i is s a an n e ex xp pe er rt t s sy ys st te em m? ? L Li is st t t th he e p pr ro op pe er rt ti ie es s w wh hi ic ch h a an n a ap pp pl li ic ca at ti io on n s sh ho ou ul ld d p po os ss se es ss s t to o q qu ua al li if fy y f fo or r E Ex xp pe er rt t
S Sy ys st te em m d de ev ve el lo op pm me en nt t [ [I IC CA AI I Q Qu ue es st ti io on n - - M Ma ay y 2 20 01 13 3] ]

{This question maybe asked as Characteristics/ Features etc also.}

Office Automation Systems

Office Automation Systems (OAS) refers to the application of computers to handle the office activities. The
focus of these systems is on automating the office systems.
Different office activities can be broadly grouped into the following types of operations:
Document Capture: Documents originating from outside sources like incoming postal mails, notes,
handouts, charts, graphs etc. need to be preserved.
Document Creation: This consists of preparation of documents, dictation, editing of texts etc. and
takes up major part of the office time.
Receipts and Distribution: This basically includes distribution of correspondence to designated
recipients.
Filling, Search, Retrieval and Follow up: This is related to filling, indexing, searching of documents,
which takes up significant time.
Calculations: These include the usual calculator functions like routine arithmetic, operations for bill
passing, interest calculations, working out the percentages and the like.

Benefits of Office Automation Systems
OAS improve communication within an organization and between organizations.
OAS reduce the cycle time between preparation of messages and receipt of messages at the recipients
end.
OAS reduce the costs of office communication both in terms of time spent by executives and cost of
communication links.
OAS ensure accuracy of communication flows.

IS Type VIII. Text Processing Systems

Text processing systems are the most commonly used components of the OAS. This is so because a large
proportion of the office communication takes place in writing using
words of a natural language.
Text processing systems automate the process of development of
documents such as letters, reports, memos etc. They permit use of
standard stored information to produce personalized documents.
Such automation reduces keying effort and minimizes the chances of
errors in the document.
The text processor may be simple word processing systems or
desktop publishing systems.
The desktop publishing systems help in quick production of multiple copies of the document with
quality printing.
The desktop publishing systems are often supported with laser printers, inkjet printers, scanners and
other such devices for producing good quality documents.


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IS Type IX. Electronic Document Management Systems

The computer based document management systems are used for capturing the information contained in
documents, storing for future reference and communicating the relevant parts to the users as and when
required. These systems are linked to the office automation systems such as text
processors, electronic message communication systems etc.

Advantages
These systems are very useful in remote access of documents that is almost
impossible with manual document management systems. For example, a
customer may have a complaint concerning delivery of goods not being in
accordance with the delivery instructions in the order. The computer based
document management system would enable the executive to access the document
through his notebook computer connected to any telephone line and show it to the customer, his order
document in the office.
In the case of internal communication, document management systems can prove to be very useful. For
example, the loan application form filed in a branch of a bank can be accessed by the sanctioning officer for
scrutiny at the head office or any office for scrutiny of loan proposals.
With computer based document management systems, location of the executive becomes irrelevant for
access to documents. Thus, these systems can be very useful in an office environment where traveling
executives share work space in the office.

IS Type X. Electronic Message Communication Systems

Business enterprises have been using a variety of communication systems for finding and receiving messages.
These include telephone, mail and facsimile (Fax), etc. The computer based message communication systems
offer a lot of economy not only in terms of reduced time in sending or receiving the message but also in terms
of reliability of the message and cost of communication.

Components of Message Communication Systems

1. Electronic Mail: Various features are listed below:
Electronic transmission: The transmission of messages with email is electronic and message delivery is very
quick, almost instantaneous. The confirmation of transmission is also quick and the reliability is very high.
Online development and editing: The email message can be developed and edited online before transmission.
The online development and editing eliminates the need for use of paper in communication.
Broadcasting and Rerouting: Email permits sending a message to a large number of target recipients. Thus it
is easy to send a circular to all branches of a bank using Email resulting in a lot of saving of paper.
Integration with other Information systems: The E-mail has the advantage of
being integrated with the other information systems. Such an integration helps in
ensuring that the message if accurate and the information required for the
message is accesses quickly.
Portability: Email renders the physical location of the recipient and sender
irrelevant. The email can be accessed fro any Personal computer equipped
with the relevant communication hardware, software and link facilities.
Economical: The advancements in communication technologies and competition
among the communication service providers have made Email the most economical mode for sending and
receiving messages.
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Q Qu ue es st ti io on n 1 16 6: : E Ex xp pl la ai in n a an ny y f fo ou ur r f fe ea at tu ur re es s o of f E El le ec ct tr ro on ni ic c m ma ai il l. . [ [I IC CA AI I Q Qu ue es st ti io on n - - N No ov v 2 20 01 12 2 - - 4 4 m ma ar rk ks s] ]

2. Facsimile (Fax)
Facsimile (Fax) is electronic communication of images of documents over telephone
lines. The computer based fax technology automates fax communication and permits
sharing of fax facilities.
It uses special software and fax servers to send and receive fax messages using
common communication resources. These servers have the ability to receive fax
messages and automatically reroute them to the intended recipient after viewing
it at the central computer, similarly, the managers in an enterprise can leave the fax messages to the server
which will send it to the intended recipient automatically.
With the advent of Emails, the use of Fax seems to be fading away.

3. Voice Mail
Voice mail is a variation of the email in which messages are transmitted as digitized
voice.
The recipient of the voice mail has to dial a voice mail service or access the e-mail box
using the specified equipment and he can hear the spoken message in the voice of the
sender.
The secured type of voice mail service may require the recipient to enter identification
code before the access is granted to the stored information.

IS Type XI. Teleconferencing and Video-conferencing Systems

Teleconferencing is conducted a business meeting involving more than two persons
located at two or more different places. The teleconferencing helps in reducing the
time and cost of meeting as the participants do not have to travel to attend the
meeting. Teleconferencing may be audio or video conferencing with or without use
of computer systems.

The computer based teleconferencing has the advantage of flexibility in terms of pre-
recorded presentations and integration with other information systems. These
systems are based on Personal computers featuring a digital camera and run on a visual communication
software. The communication links are still quite expensive making the desktop video conferencing
useful only for selected applications.

Q Qu ue es st ti io on n 1 17 7: : S Sy ys st te em ms s a an na al ly ys st ts s d de ev ve el lo op p v va ar ri io ou us s c ca at te eg go or ri ie es s o of f i in nf fo or rm ma at ti io on n s sy ys st te em ms s t to o m me ee et t a a v va ar ri ie et ty y o of f b bu us si in ne es ss s n ne ee ed ds s. .
D Di is sc cu us ss s a an ny y t th hr re ee e s sy ys st te em ms s b br ri ie ef fl ly y. .

IS Type XII. Some other information systems

(A) Knowledge Management Systems
These are knowledge based systems that support the conception, association and propagation of business
knowledge within the enterprise.

(B) Functional Business Information Systems
These systems support the operational and managerial applications of the basic enterprises of an industry.

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(C) Strategic Information Systems
These systems provide industry strategic products, services and capabilities for competitive advantage.

(D) Cross Functional Information Systems
These systems are also known as integrated information systems that combine most of the information
systems and are designed to produce information and support decision making for different levels of
management and business functions.

(E) Knowledge Management Systems
These help businesses in creation and sharing of information and are typically used in a business where
employees create new knowledge and expertise, which can then be shared by other people in the enterprise to
create further commercial opportunities.
For example, KMS are most effectively used in firms of lawyers, accountants and management consultants.
One can say that these are effective in organizations which allow efficient categorization and distribution of
knowledge.

{We have already studied about these four systems but with some other names. These seem to be repeated here}
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Topic 1.3 Information as a Key Business Asset

Information is a strategic resource that helps enterprises in achieving long term objectives and goals.
Information management enhances an organizations ability and capacity to deal with and achieve its mission
by meeting challenges of competition, timely management and resource management.

(A) Attributes of Information
Following are the attributes of information, which are required to make it useful:

Attribute Explanation Examples
1. Timely
availability
Availability of information is a very
important property of information.
If information is not available at the time of
need, it is useless.
Region wise sales of the
companys products should
be available when the annual
assessment is being done to
increase/ decrease marketing
focus in any particular region.
2. Purpose/
Objective
Information must have some purpose/
objective at the time it is transmitted,
otherwise it becomes raw data.
It helps in creating new concepts,
identifying problems, solving problems,
decision making, planning, initiating, and
controlling
Here, the purpose is decision
making, i.e. whether to
increase/ decrease marketing
focus in any region.
3. Mode and
format
Information is usually visual, verbal or in
written form
All the statistical rules of compiling
statistical tables and presenting information
by means of diagram, graphs, curves, etc.,
should be considered and appropriate one
followed.
Year on year sales of the
various products in different
regions maybe depicted in
form (i.e. mode and format)
of graphs and bar charts.
4. Completeness The information should be as complete as
possible.
For example, the position of a student in a
class can be find out only after having the
information of the marks of al students and
total number of students in a class.
Similarly, with the complete information, a
manager is in a much better position to
decide whether or not to undertake the
venture.
Sales information should be
complete, i.e. should not have
missed out the sale of any
region/ branch.
5. Reliability The information should be from reliable
sources.
Reliable information is a measure of failure
or success of using information for decision-
making.
Sales information should be
extracted from the companys
ERP by using a reliable
report.
6. Quality Quality refers to the correctness of
information.
Information is likely to be spoiled by

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Attribute Explanation Examples
personal bias. To get rid of the errors,
internal controls should be developed and
procedure for measurements prescribed.
For example, an over-optimistic salesman
may give rather too high estimates of the
sales, which may hamper the reliability of
information. This should be controlled by
maintaining correct records of actual sales.
7. Frequency The frequency with which information is
transmitted or received affects its value.
Frequency should be related to the
operational need, based on the level of
management.
Sales information maybe
required by the top
management on an annual
basis only, whereas at the
level of Sales executive, sales
information maybe on a daily
or weekly basis.
8. Current/
Updated
Value of information usually decays with
time and usage and so it should be refreshed
from time to time.
For example, in a highly fluctuating share
market a broker is always interested about
the latest information of a particular stock.
Similarly, the running score sheet of a
cricket match should be refreshed at fixed
interval so that the current score will be
available.

9. Rate The rate of transmission/reception of
information may be represented by the time
required to understand a particular
situation.
A useful information is the one which is
transmitted at a rate at which the recipient
wants to receive.
For example, the information available from
internet site should be should be available at
the click of a mouse, and one should not
wait for an hour.

10. Value of
information
It is defined as difference between the value
of the change in decision behaviour caused
by the information and the cost of the
information.
If new information causes a different
decision to be made, the value of the new
information is the difference in value
between the outcome of the old decision and
that of the new decision, less the cost of
obtaining the information.


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{Examples in the third column are for understanding, and may not be quoted in examination.}

{This question maybe asked as Characteristics/ Features etc also.}

(B) Role of Information in Business/ Types of Information Systems at Different Management Levels
In todays business environment, it becomes mandatory to have complete information for any enterprise.
The information and information systems can be categorized on the basis of its requirement by the Top,
Middle and Lower management.

Management
Level
Who all comprise this
management level?
What type of information is required
by this level?
Information
Systems Used
Top
Management
The top management
generally comprises
of owners/
shareholders, board
of directors,
chairman, managing
director, chief
executive etc.
Top Management strives for
information that helps them in major
policy decisions.
The top management requires
information that helps them in
making strategy of the enterprise in
terms of types of products and
customers.
For example, a Laptop
manufacturing/ distribution
company may require information
about the number of customers with
income exceeding Rs.1 Lacs a month
and working in IT Sector, to, decide
about the launch of a notebook with
the latest operating system.
Decision
Support
Systems
(DSS)
Executive
Information
Systems (EIS)
Middle
Management
It comprises of the
heads of the function
departments e.g.
purchase manager,
production manager,
marketing managers,
financial controller,
and divisional
officers working
under these officers.
Middle management requires
tactical information that helps in
implementing decisions taken by the
top management.
For example, offers of companies
during festive seasons in a location
require information about the
customers buying capacity in that
particular location.
Management
Information
Systems
(MIS)
Lower
Management
It comprises of
superintendents,
supervisors etc.
Lower management requires
operational information, which is
required.
The operational information mainly
consists of information about stock
in hand, information about customer
order pending, bills payable, etc.
Transaction
Processing
Systems
(TPS)

{The chart is not advised for the examination purposes. Instead, all the details should be provided for a particular level of
management and then for the next level.}

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Topic 1.4 Application of Information Systems in Enterprise Processes

(A) Vital roles performed by Information Systems in Enterprise Processes
Information systems perform three vital roles in business firms:
Support an organizations processes and operations. This includes Operations Support Systems like
Transaction Processing Systems and Process Control Systems.
Support business decision making. This includes Management Information Systems, Decision Support
Systems and Executive Information Systems.
Support strategic competitive advantage. This includes Expert Systems.

(B) Knowledge required by a business manager to operate a Information System efficiently and effectively
Following information is required by a business manager for the same:
Foundation Concepts: It includes knowledge of fundamental businesses, and management concepts,
e.g. what are components of a system.
Information Technologies: It includes knowledge about various components such as hardware,
software, operations, data management, network and other technologies.
Business Applications: It includes knowledge of the IT used in Business processes, operations and
decision making.
Development processes: It comprises knowledge about how end users and staff specialists develop and
execute IT solutions to problems.
Management challenges: It includes knowledge about how the functions and IT resources are
maintained and utilized to attain top performance and build the business strategies.

(C) Prime areas where IT enabled tools are used
Supply chain management
Marketing
Retailing
Customer Relationship Management
Decision Making
Knowledge Management

{We have studied about Different Areas of a CBIS being Inventory Management, Production, Marketing and Sales,
Finance and Accounting and Human Resource Management. In the current concept also, some areas have been
mentioned, and some of the examples are common in both cases. The students should be careful in understanding the
requirement of the question. }

(D) Different IT enabled tools used by three levels of management
Top Management mainly uses: Decision Support Systems (DSS), Internet, Intranet and Laptops.
Middle Management mainly uses: Enterprise Resource Planning (ERP), Database Management Systems
(DBMS), Laptops, Desktops, Wi-Fi etc.
Lower Management mainly uses: Printers, Scanners etc.

(E) IT Technologies used by businesses
1. Business Website
By having a website, enterprise becomes reachable to large amount of customers.
In addition, it can also be used as an effective advertisement tool, which is cost effective.
These websites can be used by using HTML, XML, ASP.NET

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2. Internet and Intranet
Intranet is a system that permits the electronic exchange of data within an organization, between staff and
managers.
Internet is a system that permits the electronic exchange of data outside the organization.
Intranet and internet provide platform to the business world for conducting business in a faster and easier
way.
These enable the use of Ecommerce amongst partners such as suppliers, wholesalers, retailers and
distributors.

3. Software and Packages
There are several softwares which are used in the business world for getting information that plays an
important role in decision making, which can then boost the business in the competitive market.
Some of these softwares are Database Management Systems (DBMS), Data Mining Tools and Knowledge
Discovery in database.
For example, by capturing buying habits of the customers using Data Mining Tools and Knowledge
Discovery, an effective marketing strategy can be used.
Similarly, these can be used in Supply chain logistics, including planning, purchasing, replenishment, logistics
and space management.

Business Intelligence

Business Intelligence refers to applications and technologies that are used to collect, provide access and
analyze data and information about computer operations.
Business Intelligence applications maybe used for various activities, such as:
Some BI applications are used to analyze performance or internal operations, e.g. Executive
Information Systems
Others are used to store and analyze data such as Data Mining systems
Others are used to analyze or manage human resources such as customer relationship and marketing
tools.

4. Computer Systems, Scanners, Laptop, Printer, Webcam, Smart Phone etc.
Use of computer systems, printers, scanners increase accuracy, reduce processing time, enable decisions to be
made more quickly, and speed up customer service.
For example, one can charge accurate prices and eliminate the need to apply price labels to individual items
by the use of scanning system.

{There is some repetition in the two topics - Different IT enabled tools used by three levels of management and
IT Technologies used by businesses}

(F) Implications of information systems in business
Information system will help managers in effective decision-making to achieve the organizational goal.
Based on well-designed information system, an organization will gain edge in the competitive environment.
Information systems help to take right decision at the right time.
Innovative ideas for solving critical problems may come out from good information system.
Knowledge gathered though information system may be utilized by managers in unusual situations.
If information system is viewed as a process it can be integrated to formulate a strategy of action or operation.

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Q Qu ue es st ti io on n 1 18 8: : G Gi iv ve e s so om me e a ad dv va an nt ta ag ge es s o of f i in nf fo or rm ma at ti io on n s sy ys st te em ms s i in n b bu us si in ne es ss s. . [ [I IC CA AI I Q Qu ue es st ti io on n - - M Ma ay y 2 20 01 10 0 - - 5 5 m ma ar rk ks s] ]

(G) Accounting Information systems
The accounting information systems comprise of the processes, procedures and systems for performing the
following activities:
Capture accounting data from business processes
Record the accounting data in the appropriate records.
Process the detailed accounting data by classifying, summarizing and consolidating the data
Report the summarized data to internal and external users.

Key steps of a typical accounting information system are given as follows:
Work steps within a business process intended to capture accounting data.
Manual or computer based records to record the accounting data.
Work steps to process, classify, summarize and consolidate the data.
Work steps that generate both internal and external reports.
Work steps that are internal controls.

(H) Information systems in different sectors

1. E-business
This is also electronic business and includes purchasing, selling, production management, logistics,
communication, support services and inventory management through the use of internet technologies.
The primary component of E-business is the Infrastructure i.e. computers, routers, communication media,
software and programmers.
Different business models being followed by e-business organizations are:
Business to Business (B2B)
Business to Customer (B2C)

Advantages of E-business
As compared to a offline business, E-business has some advantages such as:
24 hour sale
Lower cost of doing business
Eliminate of middlemen
Unlimited market place with broadened customer base
Secure payment systems, and
Easier business administration
Another advantage of E-business is that it does not require land for store or shops and anyone from anywhere
can do business anytime as information regarding products etc. is available on the web. The only investment
required is purchase of space on internet, designing and maintenance of website.

2. Financial service sector
The financial services sector entities such as banks and insurance companies) manage large amounts of data
and processes enormous number of transactions every day.
IT has changed the working style of financial services.
With the advent of IT, these financial institutions are able to operate nationally with a wide network of
regional offices.
It also reduces the cost of these institutions in terms of office staff and office buildings.
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Through the use of internet and mobile phones, financial services sector entities are in direct touch with
their customers. For example, through emails and SMS, these entities can make the customers aware of
the launch of new policies etc.
IT also makes it easier for the customers too. Now-a-days, most of the services are offered on internet, which
can be accessed from anywhere and anytime.
This industry is characterized by large mainframe systems.

IT in Banks
In traditional banking system, the customer has to visit bank branch to deposit and withdraw money and
update the passbook.
With the advent of IT, a lot of activities do not require physical visits to the Banks.
For instance, the customers can do banking transactions by using internet banking or phone banking.
Similarly, deposit or withdrawal of money can be done from any ATM or through internet or mobile banking.
Also, the customers can check the balances in their accounts by using internet and mobile banking.
In addition, several other products are being offered to the customers such as bill payments etc.

3. Wholesaling and Retailing
A visit to any large store will show that IT has become a vital part of retailing.
The laser scanners used in most grocery supermarkets and superstores to read product bar codes are amongst
the most distinctive examples of modern computer technology.
Retail businesses use IT for several activities such as Buying products, Stock control, Selling items by
capturing sales data item wise, Customer information, Accounting and Management Reports. Also, by using
internet or mobile phones, retailers can collect and exchange data between stores, distribution centres,
suppliers and head offices.
Wholesale businesses also use IT for Supply chain logistics management, planning, space management,
purchasing and re-ordering. Data mining applications help in the analysis of market baskets, customer
profiles and sales trends.

4. Public sector
Public sector enterprises include services provided by government mainly hospitals, police stations,
universities etc.
Information Technology and Information Systems can be used to keep records and other related documents.
For example, and information system like an ERP can be implemented in a university to keep record of its
employees in terms of its employees in terms of their designation, leaves availed, departments and
achievements that can be used further in analyzing their performance.
Similarly, with the use of IT/ IS, it becomes easy to file FIR of a case without going to a police station
personally.
Also, documents like passports can be made easily by applying online.

5. Others
IT is efficiently used in entertainment industry (games, picture collection etc.), agriculture industry, tour
industry and consultancy etc.

(I) Enterprise Resource Planning Packages
Definitions
An ERP system is a multi module software system that integrates all business process and functions of the
entire Enterprise into a single software system, using a single integrated database. Each module is intended to
collect, process and store data of a functional area of the organization and to integrate with related processes.
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ERP can be defined as a system, which is a fully integrated business management system that integrates the
core business and management processes to provide an organization a structured environment in which
decisions concerning demand, supply, operational, personnel, finance, logistics etc. are fully supported by
accurate and reliable real time information.
These days, several firms are replacing legacy systems with newer clients/server based solutions, and ERP is
one of the leading solutions.

Examples
For example, a module may be designed to process purchasing transactions and record all data about
purchase orders. This module must integrate with accounts payable and inventory since the vendor must be
paid and the inventory increased as the purchased goods arrive.
Similarly, when a customer order is entered into an ERP system, a customer representative can have access to
information such a production schedules, and shipping schedules. Therefore, employee can answer any
questions that the customer may ask, such as the following:
Is the product in stock?
If not, when will it be produced or restocked?
How soon can it be shipped?
When did we place the last order for this item?
Each of the software modules of the ERP system automates business activities of a functional area within an
organization.

Features of an ERP
Information is updated instantly using the same database and each functional area can easily share
information with other areas of the organization as data is input once and processed as required and also
linked to all related processes and made available for users as required.
ERP is one of the latest high-end solutions that seek to streamline and integrate operation processes and
information flows in the company to synergize the five major resources of an organization namely men,
money, machine, materials and market.
The objective of ERP is to provide support for adopting best business practices, to implement these practices
with a view towards enhancing productivity and to empower the customers and suppliers to modify the
implemented business processes to suit their needs.
Data Mining (DM) can be applied in database analysis and decision support i.e. market analysis and
management by finding patterns that are helpful in target marketing, customer relation management, market
basket analysis, cross selling, market segmentation, risk analysis, customer retention, improved underwriting,
quality control, competitive analysis and fraud detection. Other applications of DM are:
Text mining,
Web analysis,
Customer profiling it can list out what type of customers buy what products by using clustering or
classification,
Identifying customer requirements it can identify the most demanding and appropriate products for
different customers, and also can list the factors that can attract new customers using prediction, etc
Provide summary information various multidimensional summary reports and statistical summary
information,
Finance planning and asset evaluation
Cross sectional and time series analysis, and
Resource planning it can summarize and compare the resources and spending.