Chapter

1-1

Introduction
Applying information technology (IT) to accounting
systems

Financial accounting
Managerial accounting
Auditing
Taxation

Increased career opportunities

Specialized employment
Combine accounting and advanced computer skills
Chapter
1-2

Chapter 1:
Accounting Information Systems
and the Accountant

Introduction
Accounting Information Systems (AIS)
New Features in AIS
Accounting and IT
Careers in AIS

Chapter
1-3

AIS: The Intersection of

Accounting and IS

Chapter
1-4

Accounting Information
Systems
An Accounting Information System (AIS)

Data and processing procedures

Creates needed information for users

AIS Today

Financial and non-financial data

Enterprise-wide information system
Business process focused
Chapter
1-5

The Accountants
Challenge
Provide information to support decision-making
Business and Government processes
Accounting and Finance
Non-Accountants
Chapter
1-6

Information (versus Data)

Data

Raw facts
No organization or meaning
Beginning of audit trail

Information

Processed data
Meaningful to users
Chapter
1-7

AIS Components

Chapter
1-8

Computerized Data
Processing Problems
Information overload for users
Unable to identify input errors
Difficult to follow audit trails

Chapter
1-9

AIS and ERP

Accounting Information Systems
Internal and External users
Financial information

Enterprise Resource Planning Systems

Internal users
Financial information
Nonfinancial information

Chapter
1-10

AIS and ERP

Overlapping of the Systems

Provide same information

Emphasize business processes

Integration into seamless databases

Chapter
1-11

Study Break #1
Which of the following is likely to be information rather than
data?
A.Sales price
B.Customer number
C.Net profit
D.Employee name

Chapter
1-12

Study Break #1 - Answer

Which of the following is likely to be information rather than
data?
A.Sales price
B.Customer number
C.Net profit
D.Employee name

Chapter
1-13

Study Break #2
With respect to computerized AIS, computers:
A.Turn data into information in all cases
B.Make audit trails easier to follow
C.Cannot catch mistakes as well as humans
D.Do not generally process information more quickly than
humans

Chapter
1-14

Study Break #2 - Answer

With respect to computerized AIS, computers:
A.Turn data into information in all cases
B.Make audit trails easier to follow
C.Cannot catch mistakes as well as humans
D.Do not generally process information more quickly than
humans

Chapter
1-15

AIS: Role in Organizations

Information Age

Impact of technology
Fewer workers producing goods

Knowledge workers

Produce, analyze, manipulate, and distribute information

Focus on business activities

Chapter
1-16

AIS: Role in Organizations

E-Business

Conducting business over the Internet

Increased importance and growth

E-Commerce

Subset of e-business
Buying and selling transactions

Chapter
1-17

Whats New in AIS?

Suspicious Activity Reporting
Countering Terrorism
Corporate Scandals and Accounting
The Sarbanes-Oxley and Patriot Acts

Chapter
1-18

Suspicious Activity
Reporting

Chapter
1-19

Corporate Scandals and

Accounting
Enron (2001)

Manipulation of accounting records

Understate liabilities and inflate earnings

Bernard Madoff (2008)

Investment fund manager

Ponzi scheme
$50 billion in losses
Chapter
1-20

The Sarbanes-Oxley Act of

2002
CEOs must certify the accuracy and completeness of
financial statements
Public companies must hire independent, new auditors to
review internal controls
Section 404

Implement and assess internal controls

Auditors evaluate those assessments
Chapter
1-21

Study Break #3
The Sarbanes-Oxley Act of 2002:
A.Enables U.S. officers to wire tap corporate phones if
required
B.Has lead to a decrease in the amount of work done by
auditors and accountants
C.Forbids corporations from making personal loans to
executives
D.Requires the CEO of a public company to take
responsibility for the reliability of its financial statementsChapter
1-22

Study Break #3 - Answer

The Sarbanes-Oxley Act of 2002:
A.Enables U.S. officers to wire tap corporate phones if
required
B.Has lead to a decrease in the amount of work done by
auditors and accountants
C.Forbids corporations from making personal loans to
executives
D.Requires the CEO of a public company to take
responsibility for the reliability of its financial statementsChapter
1-23

Study Break #4
The acronym SAR stands for:
A.Simple accounting receipts
B.Suspicious accounting revenue
C.Suspicious activity reporting
D.Standard accounts receivable

Chapter
1-24

Study Break #4 - Answer

The acronym SAR stands for:
A.Simple accounting receipts
B.Suspicious accounting revenue
C.Suspicious activity reporting
D.Standard accounts receivable

Chapter
1-25

Accounting and IT

Chapter
1-26

Financial Accounting
Objective of Financial Accounting

Provide relevant information

External parties (Investors, Creditors)
Financial Statements

The Audit Trail

Traces the accounting cycle

Data flow from input to output
Chapter
1-27

A Financial Accounting
Audit Trail

Chapter
1-28

Financial Accounting
Non-Financial Data

REA Accounting
Resources, Events, and Agents

Real-Time Reporting
Interactive Data and XBRL

Reusable data in multiple applications

Tagging data
Chapter
1-29

Managerial Accounting
Objective
Provide relevant information
Internal users (Managers)

Components
Cost Accounting
Budgeting

Chapter
1-30

Features of Managerial
Accounting

Chapter
1-31

Cost Accounting
Measure and Control Costs

Acquisition, processing, distribution, and selling

activities

AIS Examples
Activity-Based Costing
Corporate Performance Measurement and Business
Intelligence

Chapter
1-32

Activity-Based Costing
Assigning of Overhead
Increased automation created difficulties
Lacked direct relationship between labor and
overhead

AIS Implementation
Easier assignment of overhead
Important aspect of strategic planning

Chapter
1-33

Corporate Performance
Measurement
Responsibility Accounting System
Trace unfavorable performance to responsible
department or individuals
Immediate corrective action by managers

Balanced Scorecard

Financial Performance
Customer Knowledge
Internal Business Processes
Learning and Growth

Chapter
1-34

Business Intelligence
and Dashboards

Chapter
1-35

Budgeting
Definition

Financial projection for the future

Short-range and long-range

Usefulness

Managerial control
Compare actual and budgeted results

Chapter
1-36

Study Break #5
A dashboard is:
A.A computer screen used by data entry clerks for input
tasks
B.A physical device dedicated to AIS processing tasks
C.A summary screen typically used by managers
D.A type of blackboard used by managers to present useful
information to others
Chapter
1-37

Study Break #5 - Answer

A dashboard is:
A.A computer screen used by data entry clerks for input
tasks
B.A physical device dedicated to AIS processing tasks
C.A summary screen typically used by managers
D.A type of blackboard used by managers to present useful
information to others
Chapter
1-38

Study Break #6
Assigning overhead costs based on the resources, rather
than only direct labor, used in manufacturing is an example
of:
A.Activity-based costing (ABC)
B.Budgeting
C.Cost-plus accounting
D.Financial, rather than managerial, accounting
Chapter
1-39

Study Break #6 - Answer

Assigning overhead costs based on the resources, rather
than only direct labor, used in manufacturing is an example
of:
A.Activity-based costing (ABC)
B.Budgeting
C.Cost-plus accounting
D.Financial, rather than managerial, accounting
Chapter
1-40

Auditing
Traditional role

Evaluate the accuracy and completeness of a

corporations financial statements

Present role
Evaluate clients compliance with HIPAA laws
IT evaluations and audits (security, privacy)
Management consulting

Chapter
1-41

Taxation
Taxation Software

Example of AIS
Create and evaluate tax strategies
Transmit completed forms

Professional Usage

Research challenging questions

Access more up-to-date information
Database access

Chapter
1-42

Careers in Accounting
Information Systems
Traditional Accounting

Understanding of accounting and information systems

Certified Information Technology Professional

Systems Consulting

Designing systems and reengineering processes

Software and hardware selection
Value-added resellers (VARs)
Chapter
1-43

Careers in Accounting
Information Systems
IT Auditing and Security

Risk analysis with Information Systems

Aid financial auditors in evaluation of controls
Certified Information Systems Auditors (CISAs)
Penetration testing

Chapter
1-44

AIS at Work: Consulting

Work for CPAs
Disaster Recovery Planning

Assures continuity of operations

Must test plan regularly

IT Exposure

Viruses and Worms

Auditing Standard No. 60

Report lack of disaster plan

Chapter
1-45

Copyright
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use of the information contained herein.

Chapter
1-46

Chapter 1

Chapter
1-47