Chapter 1 (The Information System) Flashcards
supports operations level tasks with highly detailed information about the business transactions that have occurred (sale, shipment of goods, use of labor and material, and transfer of resources)
horizontal flow of information
information down from senior management to through to operations and back up from operations to senior management
vertical flow
product-oriented work of the business (manufacturing, sales, distribution, billing)
operations
controlling day to day operations
operations management
short term planning and coordination of activities
middel management
longer term planning and setting organizational objectives
top management
Three fundamental objectives common to all organizations are:
- support stewardship function of management
- support management decision making
- support day by day operations
manager’s responsibility to properly manage the resources of the firm and to report on their activities
stewardship
set of formal procedures by which data is collected, stored and processing into information & distributed to users
information system
___ processes non-financial transactions that are not normally part of the ___:
For example:
- capital budgeting
- product analysis
- delivery scheduling
- employee benefits
MIS; AIS
The ___ accepts inputs known as ___ that are processed and turned into ___.
IS; transactions; information
an event that affects or is of interest to the organization and is processed by its information system as a unit of work.
transaction
economic events that effect the assets and equities of the organization is reflected in its accounts and is measured in monetary terms
financial transactions
- paying for products
- paying for service
- buy inventory
- all have debits and credits
- purchase of an airline ticket
- sale of a textbook
financial transaction
- wanting your new name on your diploma
- changing address
- adding a new customer
- changing a customer’s address
non-financial transactions
all other events processed by the organization’s information system
non-financial transactions
subsystem of the IS that processes financial transactions and non financial transactions that directly effect the processing of financial transactions
AIS
What are the three subsystems of the AIS:
- transactions processing Subsystem
- general ledger/financial reporting subsystem
- management reporting system
supports daily business operations
Converts economic events into financial transactions, records financial transactions in the accounting records and distributed essential financial information to operations personnel to support daily activity.
Revenue cycle, expenditure cycle, and conversion cycle
transactions processing Subsystem
creation of the traditional financial statements
Input into the GL/FRS system is from the transaction system
Summarizes transactions and accounts for non-frequent transactions
FRS generates the output financial statements
FRS focuses on non-discretionary reporting due to the fact that the format and information is generally defined by GAAP, IRS, etc.
general ledger/financial reporting subsystem
special purpose reports used to make decisions
discretionary reporting
Aids in the decision making of management
Budgets, variance analysis, cost reports, trends, etc.
management reporting system
- Focus on financial reporting information
- Focus on processes and procedures that impact financial reports and information
- Controls around AIS
Sarbanes-Oxley
- facts
- may or may not be processed
- have no direct effect on user’s actions
data
causes the user to take actions
information
financial transactions that enter the information system from internal and external sources.
data sources
the most common source of data for most organizations.
external financial transactions
involve the exchange or movement of resources within the organization.
internal financial transactions
example:
sale of goods and services, purchase of inventory, receipt of cash, and disbursement of cash (including payroll)
external
example:
movement of raw materials into work-in-process (WIP), application of labor and overhead to WIP, transfer of WIP into finished goods inventory, and depreciation of equipment
internal
Functions for transforming data into information according to the general AIS model:
- Data Collection
- Data Processing
- Data Management
- Information Generation
Objective of data collection - To ensure that data entering system is:
- valid
- complete
- free from material error
has tables and in those tables you have records (rows) that capture attributes which is the aptitudes of those records
database
A Logical and relevant characteristic of an entity about which the firm captures data. Relevant because if missing the record does not make sense
Logical because relate to the entity
Attribute
A complete set of attributes for a single occurrence with an entity class. Needs a unique identifier so that each record can be located. Primary Key.
record
Complete set of records of an identical class.
file (table)
assign new records and stores them
storage
task of locating and extracting an existing records from the database for processing
retrieval
permanently removing obsolete or redundant records from the database
deletion
Process of compiling, arranging, formatting, and presenting information to users.
information generation
What are the characteristics of useful information:
- relevance (serves a purpose)
- timeliness (no older than the time period of the action it supports)
- accuracy (free from material errors)
- completeness (all information essential to a decision or task is present)
- summarization (aggregated in accordance with the user’s needs
Value of information is determined by its ___.
reliability
When information is useful and consistently present, the information is reliable and has value to the user.
Output of one system that becomes a source of data into the same or another system.
feedback
- Manages the financial information resources of the firm
- role in transaction processing
- independence –> separation of duties
accounting function
- Captures and records the financial effects of the economic events known as transactions
- Distributes transaction information to operations personnel to coordinate their key tasks
role in transaction processing
- So much reliance on systems
- Accountants must be able to clearly convey their needs to the systems professionals who design the system.
- The accountant should actively participate in systems development projects to ensure appropriate systems design.
accountants’ role in AIS
the domain experts and responsible for the conceptual design of the AIS.
accountants
design involves specifying the criteria for identifying delinquent customers and the information that needs to be reported.
conceptual system
What are the different types of audits?
- external (financial) audits: do not work within the company
- internal audit: work within the company
- fraud audit: this is where we look for fraudulent transactions
process of affirming or certifying in an official manner.
attestation
an independent appraisal function established within an organization to examine and evaluate its activities as a service to the organization.
internal audit
investigate anomalies and gather evidence of fraud that may lead to criminal conviction.
fraud audit
