Accounting Information Systems:

Essential Concepts and Applications

Fourth Edition by Wilkinson, Cerullo, Raval,

and Wong-On-Wing

Chapter 3: AIS
Enhancements Through
Information Technology and
Networks
Slides Authored by Somnath
Florida Atlantic University

Bhattacharya, Ph.D.

Importance of IT and Computer

Networks to Accountants
To use, evaluate, and develop a modern
AIS, accountants must be familiar with IT
Computers enable accountants to perform
their duties more quickly, accurately, and
consistently than by manual methods
Software such as electronic spreadsheets
aid accountants in analyzing financial
statements and in developing budgets

IT Components of Interest
to Accountants

Devices for data entry

Data Processing
Data Communication
Information Generation
Data Bases
Data Modeling concepts
Evaluation of internal controls in AIS
Variety of software packages
Computer Networks

Networks & Accountants

Because they transmit data and information,
networks are an integral part of AIS
Networks are vulnerable to high level risk
thus requiring special controls and security
measures.
Need to prevent loss of accounting records &
information
Need to ensure accuracy of data

Networks may be used to consolidate data

into financial information

Gains from IT for Accountants

Faster processing of transactions and other data
Greater accuracy in computations of and
comparisons with data
Lower cost of processing each transaction
More timely preparation of reports and other
outputs
More concise storage of data, with greater
accessibility when needed
Wider range of choices for entering data and
providing outputs
Higher productivity for employees and managers,
who learn to use computers effectively in their
routine and decision-making responsibilities

Task Matching to Computers

Manual
Exceptional/infrequent
transactions
Setting objectives and
policy-making judgments
New problems
Supervising employees
Social communications
Making complex strategic
decisions

Figure 3-1

Computerized
Collecting and processing
large volumes of routine
transactions
Storing large quantities of
data and information
Monitoring and controlling
continuous processes
Answering specific inquiries
based on stored data
Preparing complex analyses
and extensive reports
Helping gather data and
understanding the
relationships between all
types of decisions

Limitations of Infoages
Legacy AIS
Large portion of personnel time and effort spent on
systems maintenance
Little time & effort for value-added services
Little flexibility to changing business conditions

Financial and Operational data not integrated

Difficult to generate data with both financial and non-financial

components

The transaction processing systems focus on chart of

accounts classification
Ignore the multidimensional aspects of transactions
Files related to applications are not integrated

Inefficiencies of the manual system remodeled in

automated form

Business processes and accounting procedures not analyzed and improved

upon prior to conversion to automated form

System not geared to generate timely decisionsupport information

Computer programmers required to write new programs for ad hoc queries

Types of Network
Architectures
Wide-Area Networks
Formed among computers and interconnected devices that are geographically
distant from one another

Local-Area Networks
A type of distributed network created
when two or more linked computers are
grouped within a limited geographical
area

Centralized WANs - I
Concentrates all application processing at one
geographical location
Consists essentially of one (or a cluster of) central
mainframe computer(s) and one or more physically
remote terminals
Typically all hardware, software, and data processing
personnel are located at corporate headquarters
Advantages include:

the concentrated computing power of a large processor

low operating costs per transaction leading to economies of scale
can facilitate the use of a database approach
facilitate better security provisions
allow for greater standardization and professional planning and
control of information-related activities

Centralized WANs - II
Best suited for

Firms with centralized organizational structures

Firms with homogeneous operations
Firms with low processing activity at remote sites

Examples include

Savings and loan institutions

Banks with many ATMs and branches
Merchandizing chains
Motels
Airlines

Drawbacks include

Inflexibility
Expensive and complicated software needed
Vulnerable to disasters as a result of complete dependence on
central computer
Not user-friendly

Distributed WANs - I
This links fully functional computers in
different geographical locations.
Each remote site processes its own
applications. However, users may not have
easy access to centralized data or be able to
transmit data and information rapidly.
Computers may be interconnected by data
communications hardware and software to
other remote sites and to a central computer
facility to form an enterprise-wide network.

Distributed WANs - II
Distributed databases are useful when:
Large volumes of data need to be processed at remote locations
Managers and employees need very fast access to data on a
frequent basis

Databases may be distributed by replication or partition.

Replication: Copies of files from the main data base are stored
at remote locations
Partition: Segments of files are allocated to various locations
within the network
This avoids data redundancy, but increases the complexity of
transmitting data throughout the network
Likely to become the dominant approach as technology improves

At present most data bases are a hybrid of the two approaches

Benefits of Distributed
WANs
Can be responsive to diverse needs of users
Enable network facilities to be used efficiently
since processing jobs can be routed to unused
computer systems in the network
Are robust against individual computer failures
Flexible and adaptable to change
Best suited for firms with:

Decentralized organizational structures

Diverse operations or user groups
Clustered functions at various locations
Multiple products
Manufacturing operations
A variety of services

Drawbacks of Distributed
WANs
Difficulty in maintaining adequate control and
security
Each distributed processing location needs its own
set of controls and security measures

Given the smallness of each location,

organizational independence is not easily
achieved
Managers may sacrifice control and security for
greater productivity
Difficulty and cost of coordinating the relatively
independent and sometimes incompatible
computer systems
Added costs for multiple computers, other system
components, and communication services

LANs
A LAN may be connected to other LANs
and/or WANs via hardware devices
known as gateways or bridges
At the heart of a LAN is the workstation
Microcomputer-based workstation
Traditional workstation
Super workstation

Peer-to-Peer LANs
In smaller LANs, every workstation
functions as both a client and a server
This allows all users to share data and files on
all workstations
Called peer-to-peer network since no
workstations are dedicated to perform only
server functions
Compared to a server network, peer-to-peer
networks are less costly, easier to install, and
compare well against server networks of
similar size
Number expected to significantly increase in
the near future

Server Networks
May interconnect hundreds of workstations
More difficult to manage and interpret than peer-to-peer
networks
Provide greater security than peer-to-peer networks
At least one workstation is dedicated to performing
specific server tasks
Examples include:

Servers
Database servers
Print servers
Communications servers
Transaction processing servers

Large server networks often contain multiple servers

The Network Operating

System
In peer-to-peer networks, the Network Operating Software
(NOS) is installed in each user workstation
In a server network, most of the NOS is installed in the file
server and a portion also resides in each workstation
To run centralized LAN applications, the NOS installed in
the file server interacts with the NOS and the local
operating system installed in the workstation. The client
workstation NOS initiates a request to the file server NOS
to load files and programs into the client workstations
RAM
In a peer-to-peer network, a client NOS initiates a request
to another client NOS, which also functions as a server, to
load the requested files and/or programs into RAM

More Networks
Examples of pre-developed network
configurations resident in Network Interface
Cards include: Ethernet, Token Ring, and ARCnet
The International Standards Organization has
issued the Open Systems Interconnection (OSI)
model
Open Systems Architecture
Seamless exchange of data, files, and software
between LANs and WANs built with multiple vendors
hardware, software, and networking components

Client/Server Networks
This model splits data processing
between a user workstation (client) and
one or more servers
Majority of servers are dedicated
database servers, thereby enabling client
to share data and files, conduct database
searches, and update the database
One of the fastest growing segments of IT

Cooperative Client/
Server Computing
Most commonly implemented mode of
client/server architecture
Facilitates the optimal sharing of computer
resources since the client(s) and server(s)
jointly process the data
Clients typically employ Graphical User
Interfaces (GUIs)
Data-processing locale is transparent to
the user

Network Topologies
The STAR and RING topologies apply
to both distributed WANs and LANs
The BUS topology applies only to LANs
All three found in client/server
networks
All three may be combined to form
hybrid configurations

The STAR Configuration

Figure 3-3a

The RING Configuration

Figure 3-3b

The BUS Configuration

Figure 3-3c

Enterprise-wide Processing
and Data Systems
Enterprise-wide on-line transaction processing
systems collect and process mission-critical
accounting and operational applications
Enterprise Resource Planning Systems (ERP) such as
SAP R/3 overcome the limitations of legacy
applications
Firms typically develop two types of On-line
Analytical Processing (OLAP) systems that
supplement ERP or legacy systems
A firm can model the relevant aspects of business events
contained within the business processes allowing for the use
of relational database-related query language commands
Firms can create a data mart or data warehouse to generate
predefined reports for executives and other managers

Data Marts and Data

Warehouses
Both Data Marts and Data Warehouses organize and
store copies of informational or decision support data
A Data Mart stores copies of decision support data in a
data base for a portion of a company
A Data Warehouse stores copies of decision support
data in an integrated data base for an entire enterprise
As opposed to applications-oriented data in legacy
systems, data in a data mart or warehouse are stored
by subject areas (e.g., customers)
Data may be stored in both summarized or raw form
Both have drill down and data mining features

Specialized Inter-organizational
Systems/Networks

Internet Commerce and Electronic Commerce

Point-of-Sale Systems/Networks
Electronic Funds Transfer (EFT) Systems
Electronic Data Interchange (EDI) Systems
Value Added Networks (VANs)

The Internet (TCP/IP)

The World Wide Web (WWW)
Hypertext information retrieval system

Intranets
Extranets

Accounting Information Systems:

Essential Concepts and Applications
Fourth Edition by Wilkinson, Cerullo,
Raval, and Wong-On-Wing

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