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Answer 1
Introduction
MIS can be defined as an integrated, user-machine system for providing information to support
managerial, operational and decision making functions in an organization. According to Barry
E.Cushing, MIS is “A set of human and capital resources within an organization which is
responsible for the collection and processing of data to produce information which is useful to all
levels of management in planning and controlling the activities of an organization.” For the
purpose of analysis, planning, control and decision making, the system uses manual procedures,
computer hardware and software, models and a data base.
Information is needed at all levels within a business organization. However its scope, content and
presentation differ from one level to another. Based on the location at which information is used,
it can be classified as operational, tactical and strategic information
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Characteristics of MIS
MIS have certain characteristic that distinguish them from other information systems. In the
following section, we discuss the salient features of a management information system.
Management Oriented
Management Directed
Management information system can be costly and time consuming. Hence it is important that
the top management understand their importance in increasing organizational efficiency which
would to quicker implementation.
Integrated System
MIS is based on five factors men, money, material.machine and methods. An MIS is a
combination of subsystems.Hence, it is important that MIS be viewed as an integrated system
that is a combination of functional and activities subsystems.
Activities such as data gathering, storage, retrieval and data capturing are performed only once
and data is collected from the original source. By establishing a common data flow, the system
tries to minimize data processing and maximize output generation. Such integration would help
in building an effective management information system.
Subsystem Concept
MIS consists of several subsystems that interact with each other and perform specialized tasks
that may be integrated into the total system. For convenience the organization can have a
hierarchy of subsystems that clearly represents the relationship between subsystems their
relationship with the total system
Common database
Common database acts as an integrator between the different functional subsystems in the
organization. Common database permits access to different tables by different functional
subsystems. Since data requirements are different for different levels of management, the
system supports one or more databases.
Flexibility
MIS is flexible and can be modified easily.Moreover; computerization is also simple because of
the structure and comprehensive nature of the system.
Answer 5
Prototyping
Prototyping is the process of rapid system development and testing of working models
(prototypes) of new applications through an interactive, iterative process which is evolutionary in
nature. Such system prototypes are immediately passed on to the end users to run trials and
identify deficiencies, if any. After receiving feedback from the end users, necessary modifications
are made in the system and they are once again passed to the end users. This iteration process
would continue until an efficient, workable system is developed. Prototyping makes the
developmental process faster and easier for systems analysts, especially for projects where end
user requirements are difficult to define.
At this stage the systems person works with the user to understand user’s basic
needs/requirements as regards the output from the systems. The systems person establishes
realistic user expectations, estimates the cost of developing the working prototype, defines data
elements required and determines data availability.
The system person develops the initial working /interactive prototype quickly, which meets
the user’s stated basic requirements. The prototype, performing only basic functions, is then
handed over to the user. While developing the prototype, the systems person may use the latest
software tools available to speed up application development.
The user has already received the initial prototype, which he now puts to use. This
working with the prototype enables the user to gain hands-on experience with the proposed
system and helps him to determine as to what extent the prototype meets the user needs /
expectations/requirements. The user, rather than the system person, decides the desired
changes for further improving prototype.
Case Tools
CASE {Computer Aided Software Engineering} involves using software packages to accomplish
and automate many of the activities of the information system development, including software
development or programming. CASE is basically the automation of step-by-step methodologies
for software and systems development to reduce the amount of repetitive work the
developer/programmer needs do to. The use of CASE also helps the programmers to keep pace
with the increasing sophistication in programming. The use of CASE revolutionizes the
development process as it improves the design, significantly cuts down the time to design a new
product and reduces the cost in the process.
Introduction
In their book, The New Science of Management, Allen Newell and Herbert A. Simon devised a
model of human problem solving that comprises human information processing with computer
information processing. Simon’s model of decision making considers three phases namely
Intelligence, design and choice. In the intelligence phase, information from different sources is
accepted, processed and evaluated. This helps in the easy identification of underlying problems.
During the design phase, various alternatives are identified or developed. The optimum
alternative is chosen in choice phase. Decision support system are widely used in business
organizations to provide support in activities such as financial planning,forecasting,risk
assessment,etc.To arrive at a rational solution, a DSS may make use of inquiry,analysis,models or
accounting systems.DSS are very useful when complex manipulations and different analysis
techniques need to be used to find a solution. There are basically two types of decisions,
programmable decisions and nonprogrammable decisions. Programmable decisions are those are
those that are based on predetermined rules and can be computerized. Computerization is
possible since the inputs, process methodology, analysis and choice of decision are all
predetermined. Nonprogrammable decisions are those that do not follow any fixed rules but are
based on the circumstances. However it is very important to understand that the scope of DSS is
limited to the intelligence and Design phase and does not include the actual decision in choice
phase.
Characteristics of a DSS
Flexibility
Simple models
DSS is popular because of the simplicity of the models used. Simple models enable users to use
the DSS more efficiently. Users need to change the data requirements according to the models
used. Decision makers select models based on the complexity of decisions.
Database
Decision making may require a lot of information. For meaningful information to be made
available to decision makers, it is necessary to store the information in databases, which make
data access easy and quick.
1. DSS should have in-built flexibility and ability to evolve as user-sophistication grows.
MIS DSS
Access to data possibly requiring a wait for direct access to computer and data
Manager’s turn hence no wait.
Answer 8
Data Mining
Data Mining is the extraction of implicit, previously unknown, and potentially useful information
from data. This encompasses a number of different technical approaches such as clustering, data
summarization, learning classification rules, finding dependency networks, analyzing changes,
and detecting anomalies. Data mining is the search for relationship and global patterns that
exists in large databases but is hidden among the vast amount of data. These relationships
represent valuable knowledge about the database and the objects in the database which can be
put to use in the areas such as decision support, prediction, forecasting and estimation. Basically
data mining is concerned with the analysis of data and the use of software techniques for finding
the patterns by identifying the underlying rules and features in the data.
Data Warehousing
The concept of data warehousing has evolved from the experience that the data stored for
business analyst can be most effectively accessed by separating it from the operational data.
Data miming potential can be enhanced if the appropriate data has been collected and stored in
a data warehouse.A data warehouse is a rational database management system{RDBMS}
designed specifically to meet the needs of transaction processing system.It can be loosely
defined as any centralized data repository which can be queried for business benefit.It provides
tools to satisfy the information needs of employees at all organizational levels and not just for
complex data queries,but as a general facility for getting quick,accurate and often insightful
information.Data warehousing is a new powerful technique making it possible to extract
archieved operational data and overcome inconsistencies between different legacy data
formats.Integrating data throughout an enterprise,regardless of location,format,or
communication requirements it is also possible to incorporate additional or expert information
system applications.
Answer 8
Introduction
Every day there are news stories about computer related data errors,thefts,burglaries,fires and
sabotage.Although considerable efforts have been made to reduce vulnerability to such
events,much more effort is still needed.Weak computer security and lack of internal controls
tremendously increases an organisation’s vulnerability to the following.
Computer security risks fall into one or three major categories : destruction,modification,and
disclosure.Each of these may be further classified into intentional crimes committed by computer
criminals or disgruntled employees,unintentional loss by negligent users,and environmental
attacks by nature.An effective security plan must consider all three types of threats.
Remedial Measures
Controls are used to reduce the probability of attack on computer security.As additional controls
are placed,the overall operating costs are likely to increase.Cost-benefit considerations require a
careful balance of controls.There are four main classes of controls,discussed below.
Deterrent Controls
Preventive Controls
These controls are designed to reduce the probability of an attack.They serve as the first line of
defense.Effective preventive controls will thwart a perpetrator from getting access to the
computer system.
Detective Controls
Once a system has been violated,detective controls halp identify the occurance of harm.These
controls do nothing to insulate the system from harm;they only serve to focus attention on the
problem.
Corrective Controls
After a loss has occurred,corrective controls serve to reduce the impact of the threat.Their
purpose is to aid in recovering from damage or in reducing the effect of damage.For instance,lost
information on floppies may be restored with utility programs.
The controls in information systems are divided into following broad categories :-
Physical Controls
Data Security & Physical Security
Controlling Physical access
Fire Security
Communication Controls
Line Security
Transmission Security
Digital Signature
Cryptographic Security
Emission Security
Technical Security
Application Controls
Input Controls
Processing Controls
Change Controls
Testing Controls
Output Controls
Procedural Controls
Personnel Controls
Audit Trails
Network Security
Access Control
Identification & Authentication
Data Confidentiality
Data Integrity
Digital Signature
Routing Control
Traffic Padding
Interference minimization.
Security Administration
Statutory Controls
PART-II: MCS
Answer 4
Introduction
Profit Center
Profit cente Profit is any sub-unit of an organization to which both revenues and costs are
assigned,so that the profitability of the subunit may be measured.For a profit center
organization to be established,it is necessary to have units of the organization to which both
revenues and costs can be separately attributed.A profit center’s performance report
measured in absolute terms would show profit on the bottom line.
Where any of these conditions are not met,it becomes more difficult to judge whether on
balance profit centers are beneficial.Some possible advantages of treating divisions of a
company ‘as if’ they are independent of top management control are listed as below :
Motivates managers to perform well in areas they control.
Encourages intiative.
Uses divisional manager’s specialized market knowledge.
Gives local managers responsibility for making trade-offs.
Emphasis on ‘bottom line’ spotlights poor performance anywhere.
Permits management by exception
Frees top management’s time and energy for other tasks.
Helps in training future managers.
Profit centres are ,therefore,not always the most appropriate form of divisional
organization.Some possible disadvantages of treating divisions as profit centers
are given below :
Introduction
Characteristics of M.C.S
Ongoing Process
Universality
Control function is required at every level of management and in every part of the
organization. The basic control system is usually the same involving reporting, reviewing and
course-correcting actions so as to steer the organization towards achievement of
predetermined goals.
Total System
The MCS covers all aspects of the organizational operations. Hence MCS has to understand
the inter-relationship of the sub-systems elements
Goal Congruence
Personal goals and organizational goals are different. The goal congruence implies integrating
the two or at the least minimizes the conflicts between various goals. The MCS monitors goal
congruence to ensure that the decisions and actions taken by employees are not against the
interests of the organization by bringing harmony between individual and organizational
goals.
Co-coordinating Agency
Management Control should be a central co-coordinating agency for which the line managers
should act as a focal points bringing into action the judgment preferred by the Management.
Financial Structure
The organizational performance is judged in terms of monetary impacts. Since money is the
only common determinant by means of which various elements of inputs can be clubbed and
mapped.So, MCS is generally surrounded by a financial structure.
Flexibility
Controls in an organization can expand or contract.MCS should be able to adopt and adapt to
changes as and when they occur.
Rhythmic
The MCS has a definite schedule and time span. There is also a certain sequence and
chronological order. This procedure is followed over and over again.Hence, MCS must be
rhythmic.
Goal Orientation
MCS put in its place must ensure that the organizational goals and objectives are achieved
with minimum variance and also in an efficient and effective manner. For this MCS should be
goal focused.
Answer 7
COST AUDIT
Introduction
The Institute Of Cost and Works Accountants of India defines statutory cost audit as a “system
of audit introduced by the government of India for the review, examination and appraisal of
the cost accounting records and added information required to be maintained by the specified
industries”
From the above definition, the meaning of cost audit comprises the following:
1. The verification of cost accounting records, such as cost accounts, cost reports, cost
statements, and cost data and costing techniques.
2. Examininig these records to ensure that they adhere to the cost accounting principles,
plans, procedures and objectives.
According to Sub-Section (2) of Section 233(B), a cost auditor shall be appointed by the Board
of Directors of the company in accordance with the provisions of sub-section (1B) of section
224 and with the previous approval of Central Government. According to sub-section (1) of
section 233(B), the auditor appointed under that section is expected to conduct the audit in
such a manner as may be specified in the order issued by the Central Government.Further, as
required by sub-section (4), the cost auditor must forward his report to the Central
Government and to the company within 120 days of the closing of the year to which the audit
related. The report is to be given in the form prescribed for the purpose.
Objects of Cost Audit
The objects of cost audit is to ensure that in respect of companies engaged in production,
processing, manufacturing or mining activities which may be specified
By notificatioissued by the Central Government, proper records relating to utilization of
material and labor are available, which would make the efficiency audit possible.
Answer 5
Transfer price is defined in two ways. It is defined as the amount used in accounting for any
transfer of goods and services between responsibility centers. It includes an element of profit,
the logic that no company will transfer goods or services to another company at cost. The
independent profit centers are therefore required to make profit even while transferring the
goods or services to another business unit of their own company. The fundamental principle of
transfer pricing mechanism is that the transfer price should be similar to the price that would be
charged if the product were sold to outside customers or purchased from outside vendors. This
principle is not every easy to apply in actual practice. Some people believe that there should be
no element of profit in the transfer price, and the transfer price should be set on marginal cost.
However in the corporate world, transfer price includes an element of profit.
1. It should provide each segment with the relevant information required to determine the
optimum trade-off between company costs and revenue.
2. It should induce goal congruent decisions that mean that the systems should be so designed
that decisions that improve business unit profits will also improve company profits.
3. It should help to measure the economic performance of the individual profit centers.
4. The transfer price system has to be simple to understand and should be easy to administer.
These transfer prices are difficult and complex to set. But if the market prices are not available
then this method has to be used. The usual basis used for setting these prices is standard costs.
Actual costs are not considered because they tend to pass on the production inefficiencies to the
buyer.
The product is transferred to the marketing division at the standard variable cost. After the
product is sold, the business units share the contribution earned, which is the selling price minus
the variable manufacturing and marketing costs.
Answer 6
Introduction
Kaplan and Norton describe the innovation of the balanced scorecard as follows:
The potential benefits of a Balanced Scorecard depend on what it is to be used for. Simply having
a Balanced Scorecard is not enough - the Scorecard will only be useful if it is applied correctly.
Although many different types of organisation are using Balanced Scorecard, in many different
formats, there are two distinct applications: Management Control and Strategic Control Although
visually similar, these two applications of Balanced Scorecard require substantially different
design and development processes, and provide different benefits to a management team. 2GC
summarizes the benefits of well designed and implemented Balanced Scorecards of both types.
Many modern businesses and government agencies hold most of their value in their
intangible assets, namely their people, and the knowledge those people have. Also,
modern companies recognize that mission success (or competitiveness in the case of
commercial companies) is largely driven by the ideas and innovations that come from their
people. Industrial-age management practices, focused on financial metrics and supply-
chain production, are not appropriate in this new environment. Financial metrics are
lagging indicators that tell what happened in the past. Knowledge workers communicate
and create in complex ways, and their work does not fit the supply-chain model. Therefore,
executives need a new way to assess how well their organization is functioning, how to
predict future performance, and how to align the organization toward new strategies to
achieve breakthrough performance.
The balanced scorecard has evolved to support strategic planning and management this
new work environment. The balanced scorecard transforms the strategic plan from an
attractive but passive document into the "marching orders" for the organization on a daily
basis. It provides a framework that not only provides performance measurements, but
helps planners identify what should be measured. It enables excutives to truly execute
their strategies.
This 2GC case study looks at the Balanced Scorecard implementation experiences of a European
multi-national FMCG business. Working in the late 1990's with 2GC and other firms, this company
set out to introduce a Balanced Scorecard-based strategic management system. At the time this
was one of the most ambitious projects ever undertaken, and the scope and nature of the project
challenged existing Balanced Scorecard understanding and methodology. The project generated
new insights into how to implement Balanced Scorecard for strategic control purposes, and
advanced both theory and practical understanding of how Balanced Scorecard works.
Nonetheless there were elements of the project that could have been done better, and the case
highlights these areas too