Account Information System Romney 12th Edition Chapter 1

C
HAPTER 1
Accounting Information
Systems:
An Overview
2008 Prentice Hall Business Publishing
Accounting Information Systems, 11/e
Romney/Steinbart
1 of 85
INTRODUCTION
Questions to be addressed in this chapter
include:
What is the meaning of system, data, and
information?
What is an accounting information system (AIS)?
Why is the AIS an important topic to study?
What is the role of the AIS in the value chain?
How does the AIS provide information for decision
making?
What are the basic strategies and strategic positions
an organization can pursue?
Romney/Steinbart
2 of 85
SYSTEMS, DATA, AND INFORMATION

A system is:
A set of interrelated components
That interact
To achieve a goal
Romney/Steinbart
3 of 85

Most systems are composed of smaller
subsystems . . .
. . . and vice versa!
Romney/Steinbart
4 of 85

Every organization has goals.
The subsystems should be designed to
maximize achievement of the organizations
goals.
Even to the detriment of the subsystem itself.
EXAMPLE: The production department (a
subsystem) of a company might have to
forego its goal of staying within its budget in
order to meet the organizations goal of
delivering product on time.
Romney/Steinbart
5 of 85

Goal conflict occurs when the activity of a
subsystem is not consistent with another
subsystem or with the larger system.
Goal congruence occurs when the
subsystems goals are in line with the
organizations goals.
The larger and more complicated a
system, the more difficult it is to achieve
goal congruence.
Romney/Steinbart
6 of 85

The systems concept encourages integration
(i.e., minimizing the duplication of recording,
storing, reporting, and processing).
Data are facts that are collected, recorded,
stored, and processed by an information system.
Organizations collect data about:
Events that occur
Resources that are affected by those events
Agents who participate in the events
Romney/Steinbart
7 of 85

Information is different from data.
Information is data that have been
organized and processed to provide
meaning to a user.
Usually, more information and better
information translates into better
decisions.
Romney/Steinbart
8 of 85

However, when you get more information
than you can effectively assimilate, you
suffer from information overload.
Example: Final exams week!
When youve reached the overload point,

the quality of decisions declines while the
costs of producing the information
increases.
Romney/Steinbart
9 of 85

Benefits of information
- Cost of producing information
Value of information
Benefits of information may include:
Reduction of uncertainty
Improved decisions
Improved ability to plan and schedule activities
Romney/Steinbart
10 of 85

Costs may include time and resources spent:
Collecting data
Processing data
Storing data
Distributing information to users
Romney/Steinbart
11 of 85

Costs and benefits of information are often
difficult to quantify, but you need to try when
youre making decisions about whether to
provide information.
Romney/Steinbart
12 of 85

Characteristics that make information
useful:
Relevance
It reduces uncertainty by helping you predict
what will happen or confirm what already has
happened.
Romney/Steinbart
13 of 85

useful:
Relevance
Reliability
Its dependable, i.e., free from error or bias
and faithfully portrays events and activities.
Romney/Steinbart
14 of 85

useful:
Relevance
Reliability
Completeness
It doesnt leave out anything thats important.
Romney/Steinbart
15 of 85

useful:
Relevance
Reliability
Completeness
Timeliness
You get it in time to make your decision.
Romney/Steinbart
16 of 85

useful:
Relevance
Reliability
Completeness
Timeliness
Understandability
Its presented in a manner you can
comprehend and use.
Romney/Steinbart
17 of 85

useful:
Relevance
Reliability
Completeness
A consensus notionthe nature of the
Timeliness
information is such that different people
would tend to produce the same result.
Understandability
Verifiability
Romney/Steinbart
18 of 85

useful:
Relevance
Reliability
Completeness
Timeliness
Understandability
You can get to it when you need it and in a
format you can use.
Verifiability
Accessibility
Romney/Steinbart
19 of 85

Information is provided to both:
External users
Internal users
Romney/Steinbart
20 of 85

External users
Internal users
Romney/Steinbart
21 of 85

External users primarily use information
that is either:
MANDATORY INFORMATIONrequired by a
governmental entity, such as Form 10-K
required by the SEC; or
ESSENTIAL INFORMATIONrequired to
conduct business with external parties, such
as purchase orders.
Romney/Steinbart
22 of 85

In providing mandatory or essential
information, the focus should be on:
Minimizing costs.
Meeting regulatory requirements.
Meeting minimum standards of reliability and
usefulness.
Romney/Steinbart
23 of 85

External users
Internal users
Romney/Steinbart
24 of 85

Internal users primarily use discretionary
information.
The primary focus in producing this
information is ensuring that benefits
exceed costs, i.e., the information has
positive value.
Romney/Steinbart
25 of 85
WHAT IS AN AIS?
An AIS is a system that collects, records,
stores, and processes data to produce
information for decision makers.
It can:
Use advanced technology; or
Be a simple paper-and-pencil system; or
Be something in between.
Technology is simply a tool to create,

maintain, or improve a system.
Romney/Steinbart
26 of 85
WHAT IS AN AIS?
The functions of an AIS are to:
Collect and store data about events,
resources, and agents.
Transform that data into information that
management can use to make decisions
about events, resources, and agents.
Provide adequate controls to ensure that the
entitys resources (including data) are:
Available when needed
Accurate and reliable
Romney/Steinbart
27 of 85
WHY STUDY ACCOUNTING

INFORMATION SYSTEMS?
Its fundamental to accounting.
Accounting is an information-providing
activity, so accountants need to
understand:
How the system that provides that
information is designed, implemented,
and used.
How financial information is reported.
How information is used to make
decisions.
Romney/Steinbart
28 of 85

Other accounting courses focus on how
the information is provided and used.
An AIS course places greater emphasis on:
How the data is collected and
transformed.
How the availability, reliability, and
accuracy of the data is ensured.
AIS courses are not number-crunching
courses.
Romney/Steinbart
29 of 85

The skills are critical to career success.
Auditors need to evaluate the accuracy
and reliability of information produced by
the AIS.
Romney/Steinbart
30 of 85

Tax accountants must understand the
clients AIS adequately to be confident that
it is providing complete and accurate
information for tax planning and
compliance work.
Romney/Steinbart
31 of 85

In private industry and not-for-profit,
systems work is considered the most
important activity performed by
accountants.
Romney/Steinbart
32 of 85

In management consulting, the design,
selection, and implementation of
accounting systems is a rapid growth area.
Romney/Steinbart
33 of 85

The AIS course complements other
systems courses.
Other systems courses focus on design and
implementation of information systems,
databases, expert systems, and
telecommunications.
AIS courses focus on accountability and control.
Romney/Steinbart
34 of 85

systems courses.
AIS topics are tested on the new CPA
exam.
Makes up about 25% of the Business
Environment & Concepts section of the CPA
exam.
Romney/Steinbart
35 of 85

systems courses.
AIS topics are tested on the new CPA
exam.
AIS topics impact corporate strategy
and culture.
Romney/Steinbart
36 of 85

Occupational
Culture
AIS design is
affected by
information
technology, the
organizations
strategy, and the
organizations
culture.
Strategy
AIS
Information
Technology
Romney/Steinbart
37 of 85

Occupational
Culture
Information technology
affects the companys
choice of business
strategy. To perform
cost-benefit analyses on
IT changes, you need to
understand business
strategy.
Strategy
AIS
Information
Technology
Romney/Steinbart
38 of 85

Occupational
Culture
Although culture
affects the design of
the AIS, its also true
that the AIS affects
culture by altering
the dispersion and
availability of
information.
Strategy
AIS
Information
Technology
Romney/Steinbart
39 of 85
ROLE OF THE AIS IN THE VALUE CHAIN

The objective of most organizations is to
provide value to their customers.
What does it mean to deliver value?
Lets peek in on a conversation at Joes
pharmacy . . .
Romney/Steinbart
40 of 85

Well, Mr. Pharmaceutical
Salesman, your proposal looks
good, but your prices are about
5% higher than your competitors.
Romney/Steinbart
41 of 85

Thats true, but were
comfortable with that
because of the valueadded that we bring to
this arrangement.
Romney/Steinbart
42 of 85

What is that value-added,
and how do you convert it
into dollars?
Romney/Steinbart
43 of 85

Blahblahblah
customer service
blahblahblah
Romney/Steinbart
44 of 85

Although adding value is a commonly used
buzzword, in its genuine sense, it means making
the value of the finished component greater than
the sum of its parts.
It may mean:
Making it faster
Making it more reliable
Providing better service or advice
Providing something in limited supply (like O-negative
blood or rare gems)
Providing enhanced features
Customizing it
Romney/Steinbart
45 of 85

Value is provided by performing a series of
activities referred to as the value chain.
These include:
Primary activities
Support activities
These activities are sometimes referred to

as line and staff activities respectively.
Romney/Steinbart
46 of 85

These include:
Primary activities
Support activities

Romney/Steinbart
47 of 85

Primary activities include:
Inbound logistics
Receiving, storing, and distributing the
materials that are inputs to the
organizations product or service.
For a pharmaceutical company, this activity
might involve handling incoming chemicals
and elements that will be used to make their
drugs.
Romney/Steinbart
48 of 85

Inbound logistics
Operations
Transforming those inputs into products or
services.
For the pharmaceutical company, this step
involves combining the raw chemicals and
elements with the work of people and equipment to
produce the finished drug product that will be sold
to customers.
Romney/Steinbart
49 of 85

Inbound logistics
Operations
Outbound logistics
Distributing products or services to customers.
For the pharmaceutical company, this step involves
packaging and shipping the goods to drug stores,
doctors, and hospitals.
Romney/Steinbart
50 of 85

Inbound logistics
Operations
Outbound logistics
Marketing and sales
Helping customers to
buy the organizations
products or services.
A pharmacy rep may
visit with drug stores,
doctors, etc. to inform
them about their
products and take
orders.
Romney/Steinbart
51 of 85

Post-sale
support provided to
Primary activities
include:
customers such as repair and

Inbound logistics
maintenance function.
Operations
A pharmaceutical firm will
Outbound logistics
typically not be repairing its
Marketing andproduct
sales (though the product may
be periodically reformulated).
Service
The pharmaceutical company is

more likely to be providing
advisory services to pharmacists,
etc.
Romney/Steinbart
52 of 85

These include:
Primary activities
Support activities

Romney/Steinbart
53 of 85

Support activities include:
Firm infrastructure
Accountants, lawyers, and administration.
Includes the companys accounting
information system.
Romney/Steinbart
54 of 85

Firm infrastructure
Human resources
Involves recruiting and hiring new
employees, training employees, paying
employees, and handling employee benefits.
Romney/Steinbart
55 of 85

Firm infrastructure
Human resources
Technology
Activities to improve the products or services
(e.g., R&D, Web site development).
For the pharmaceutical company, these activities
would include research and development to
create new drugs and modify existing ones.
Romney/Steinbart
56 of 85

the resources (e.g.,
Support activitiesBuying
include:
materials, inventory, fixed

Firm infrastructure
assets) needed to carry out the
Human resources
entitys primary activities.
Technology
In the pharmaceutical company,
Purchasing
the purchasing folks are trying
to get the best combination of
cost and quality in buying
chemicals, supplies, and other
assets the company needs to
run its operations.
Romney/Steinbart
57 of 85

Information technology can significantly
impact
the efficiency
and effectiveness
Good
AIS value chain:
UPS
with which
the
preceding
are
spends
over $1 activities
billion a year
on
information systems resulting in greater
carried out.
customer control over delivery, higher
driver productivity,
and lower
An organizations
value chain
cancosts.
be
Bad AIS value chain:
connected
with
the
value
chains
of
its
Limited Brands tangled integration of over 60
incompatible
information
resulted in
customers,
suppliers,
and systems
distributors.
400 trailers trying to jam into a 150 trailer lot.
Romney/Steinbart
58 of 85

Smith Supply Co.
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Service
For example, the inbound logistics of

Pharmaceuticals, Inc., links to the
outbound logistics of its suppliers.
Pharmaceuticals, Inc.
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Service
Customer Pharmacy
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Service
Romney/Steinbart
59 of 85

Smith Supply Co.
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Service
And the outbound logistics of

Pharmaceuticals, Inc., links to the inbound
logistics of its customers.
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Service
Customer Pharmacy
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Service
Romney/Steinbart
60 of 85

Smith Supply Co.
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Service
The linking of these separate value chains

creates a larger system known as a supply
chain.
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Service
Customer Pharmacy
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Service
Romney/Steinbart
61 of 85

Smith Supply Co.
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Service
Information
technology can
facilitate synergistic
linkages that improve
the performance of
each companys value
chain.
The linking of these separate value chains

creates a larger system known as a supply
chain.
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Service
Customer Pharmacy
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Service
Romney/Steinbart
62 of 85

There is variation in the degree of
structure used to make decisions:
Structured decisions
Repetitive and routine.
Can be delegated to lower-level employees.
EXAMPLE: Deciding whether to write an auto
insurance policy for a customer with a clean
driving history.
Romney/Steinbart
63 of 85

Semistructured decisions
Incomplete rules.
Require subjective assessments.
EXAMPLE: Deciding whether to sell auto
insurance to a customer with a tainted
driving history.
Romney/Steinbart
64 of 85

Semistructured decisions
Non-recurring and non-routine.

Require a great deal of subjective
assessment.
EXAMPLE: Deciding whether to begin
selling a new type of insurance policy.
Romney/Steinbart
65 of 85

There is also variation in the scope of a
decisions effect:
Occupational control decisions
Relate to performance of specific tasks

Often of a day-to-day nature.
EXAMPLE: Deciding whether to order
inventory.
Romney/Steinbart
66 of 85

decisions effect:
Management control decisions
Relate to utilizing resources to accomplish

organizational objectives.
EXAMPLE: Budgeting.
Romney/Steinbart
67 of 85

decisions effect:
Management control decisions
Strategic planning decisions
The what do we want to be when we grow

up types of questions.
Involves establishing:
Organizational objectives
Policies to achieve those objectives
EXAMPLE: Deciding whether to diversify the

company into other product lines.
Romney/Steinbart
68 of 85

In general, the higher a manager is in the
organization, the more likely he/she is to
be engaging in:
Less structured decisions
Broader scope (i.e., strategic planning)
decisions
Romney/Steinbart
69 of 85
THE AIS AND CORPORATE STRATEGY

Corporations have:
Unlimited opportunities to invest in
technology.
Limited resources to invest in technology.
Consequently, they must identify the

improvements likely to yield the highest
return.
This decision requires an understanding of
the entitys overall business strategy.
Romney/Steinbart
70 of 85

Michael Porter suggests that there are two
basic business strategies companies can
follow:
Product-differentiation strategy
Low-cost strategy
Romney/Steinbart
71 of 85

follow:
Low-cost strategy
Romney/Steinbart
72 of 85

A product-differentiation strategy involves
setting your product apart from those of
your competitors, i.e., building a better
mousetrap by offering one thats faster,
has enhanced features, etc.
Romney/Steinbart
73 of 85

follow:
Low-cost strategy
Romney/Steinbart
74 of 85

A low-cost strategy involves offering a
cheaper mousetrap than your competitors.
The low cost is made possible by
operating more efficiently.
Romney/Steinbart
75 of 85

Sometimes a company can do both, but
they normally have to choose.
Romney/Steinbart
76 of 85

Porter also argues that companies must
choose a strategic position among three
choices:
Variety-based strategic position
Offer a subset of the industrys
products or services.
EXAMPLE: An insurance company
that only offers life insurance as
opposed to life, health, propertycasualty, etc.
Romney/Steinbart
77 of 85

choices:
Needs-based strategic position
Serve most or all of the needs of a particular
group of customers in a target market.
EXAMPLE: The original Farm Bureau-based
insurance companies provided a portfolio of
insurance and financial services tailored to the
specific needs of farmers.
Romney/Steinbart
78 of 85

Porter
also
argues
that companies
Serve
a subset
of customers
who differ must
from
othersainstrategic
terms of factors
suchamong
as geographic
choose
position
three
location or size.
choices:
EXAMPLE: Satellite Internet services are

Variety-based
strategic
position in rural areas
intended primarily
for customers
Needs-based
who cannot get
DSL or cable
services.
strategic
position
Access-based strategic position
Romney/Steinbart
79 of 85

choices:
Needs-based strategic position
Access-based strategic position
These strategic positions are not

mutually exclusive and can overlap.
Romney/Steinbart
80 of 85

Choosing a strategic position is important
because it helps a company focus its efforts as
opposed to trying to be everything to everybody.
EXAMPLE: A radio station that tries to play all types
of music will probably fail.
Its critical to design the organizations activities

so they reinforce one another in achieving the
selected strategic position. The result is synergy,
which is difficult for competitors to imitate.
Romney/Steinbart
81 of 85

The growth of the Internet has profoundly
affected the way value chain activities are
performed:
Inbound and outbound logistics can be streamlined
for products that can be digitized, like books and
music.
The Internet allows companies to cut costs, which
impacts strategy and strategic position.
Because the Internet is available to everyone, intense
price competition can result. The outcome may be
that many companies shift from low-cost to productdifferentiation strategies.
The Internet may impede access-based strategic
positions.
Romney/Steinbart
82 of 85

The
AIS should
help a company
adopt and
Predictive
data analysis
(data
maintain
its strategic adds
position.
warehousing/mining)
to competitive
advantage by forecasting future events based on
Requires
that data be collected about each
historical trends.
activity.
EXAMPLE: You can view forecasts of airfares
Requires
the collection
and integration
of trends
both
between major
airports based
on historical
financial
and nonfinancial data.
at www.farecast.com.
Romney/Steinbart
83 of 85

The authors believe:
Accounting and information systems should
be closely integrated.
The AIS should be the primary information
system to provide users with information they
need to perform their jobs.
Romney/Steinbart
84 of 85
SUMMARY
What weve learned so far:
The meaning of system, data, and information.

What an AIS is.
Why its an important topic to study.
What its role is in the value chain.
How it provides information for decision making.
What are the basic strategies and strategic positions
an organization can pursue.
How these interact with the AIS.
Romney/Steinbart
85 of 85

Account Information System Romney 12th Edition Chapter 1

Caricato da

Informazioni sul documento

Titolo originale

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

Account Information System Romney 12th Edition Chapter 1

Caricato da

Copyright:

Formati disponibili

C

2008 Prentice Hall Business Publishing

Accounting Information Systems, 11/e

2008 Prentice Hall Business Publishing

Accounting Information Systems, 11/e

SYSTEMS, DATA, AND INFORMATION

2008 Prentice Hall Business Publishing

Accounting Information Systems, 11/e

SYSTEMS, DATA, AND INFORMATION

2008 Prentice Hall Business Publishing

Accounting Information Systems, 11/e

SYSTEMS, DATA, AND INFORMATION

Accounting Information Systems, 11/e

SYSTEMS, DATA, AND INFORMATION

Accounting Information Systems, 11/e

SYSTEMS, DATA, AND INFORMATION

2008 Prentice Hall Business Publishing

Accounting Information Systems, 11/e

SYSTEMS, DATA, AND INFORMATION

2008 Prentice Hall Business Publishing

Accounting Information Systems, 11/e

SYSTEMS, DATA, AND INFORMATION

When youve reached the overload point,

Accounting Information Systems, 11/e

SYSTEMS, DATA, AND INFORMATION

2008 Prentice Hall Business Publishing

Accounting Information Systems, 11/e

SYSTEMS, DATA, AND INFORMATION

2008 Prentice Hall Business Publishing

Accounting Information Systems, 11/e

SYSTEMS, DATA, AND INFORMATION

2008 Prentice Hall Business Publishing

Accounting Information Systems, 11/e

SYSTEMS, DATA, AND INFORMATION

2008 Prentice Hall Business Publishing

Accounting Information Systems, 11/e

SYSTEMS, DATA, AND INFORMATION

2008 Prentice Hall Business Publishing

Accounting Information Systems, 11/e

SYSTEMS, DATA, AND INFORMATION

2008 Prentice Hall Business Publishing

Accounting Information Systems, 11/e

SYSTEMS, DATA, AND INFORMATION

2008 Prentice Hall Business Publishing

Accounting Information Systems, 11/e

SYSTEMS, DATA, AND INFORMATION

2008 Prentice Hall Business Publishing

Accounting Information Systems, 11/e

SYSTEMS, DATA, AND INFORMATION

2008 Prentice Hall Business Publishing

Accounting Information Systems, 11/e

SYSTEMS, DATA, AND INFORMATION

Accounting Information Systems, 11/e

SYSTEMS, DATA, AND INFORMATION

2008 Prentice Hall Business Publishing

Accounting Information Systems, 11/e

SYSTEMS, DATA, AND INFORMATION

2008 Prentice Hall Business Publishing

Accounting Information Systems, 11/e

SYSTEMS, DATA, AND INFORMATION

2008 Prentice Hall Business Publishing

Accounting Information Systems, 11/e

SYSTEMS, DATA, AND INFORMATION