account information system romney 12th edition chapter 1
TRANSCRIPT
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! HAP"# 1
Accounting InformationSystems$
An %&er&ie'
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I("%)*!"I%(
Questions to be addressed in this chapterinclude: What is the meaning of system, data, and
information?
What is an accounting information system (!"#$
Why is the !" an important topic to study$
What is the role of the !" in the %alue chain$
&o' does the !" pro%ide information for decisionmaing$
What are the basic strategies and strategic positionsan organi)ation can pursue$
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S+S"#S, )A"A, A() I(-%A"I%(
system is:
set of interrelated components
+hat interact
+o achie%e a goal
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S+S"#S, )A"A, A() I(-%A"I%(
-ost systems are composed of smaller
subsystems . . .
. . . and %ice %ersa/
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S+S"#S, )A"A, A() I(-%A"I%(
0%ery organi)ation has goals. +he subsystems should be designed to
maimi)e achie%ement of the organi)ations
goals. 0%en to the detriment of the subsystem itself.
03-40: +he production department (asubsystem# of a company might ha%e to
forego its goal of staying 'ithin its budget inorder to meet the organi)ations goal ofdeli%ering product on time.
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S+S"#S, )A"A, A() I(-%A"I%(
.oal conflictoccurs 'hen the acti%ity of asubsystem is not consistent 'ith anothersubsystem or 'ith the larger system.
.oal congruenceoccurs 'hen thesubsystems goals are in line 'ith theorgani)ations goals.
+he larger and more complicated asystem, the more difficult it is to achie%egoal congruence.
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S+S"#S, )A"A, A() I(-%A"I%(
+he systems concetencourages integration(i.e., minimi)ing the duplication of recording,
storing, reporting, and processing#.
)ataare facts that are collected, recorded,stored, and processed by an information system.
rgani)ations collect data about:
#&entsthat occur esourcesthat are affected by those e%ents
Agents'ho participate in the e%ents
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S+S"#S, )A"A, A() I(-%A"I%(
Informationis different from data.
!nformation is data that ha%e been
organi)ed and processed to pro%idemeaning to a user.
9sually, more information and better
information translates into better
decisions.
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&o'e%er, 'hen you get more information
than you can effecti%ely assimilate, you
suffer frominformation o&erloa
0ample: ;inal eams 'ee/
When you%e reached the o%erload point,
the
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S+S"#S, )A"A, A() I(-%A"I%(
>enefits of information
? @ost of producing information
Aalue of information
Benefits of information may inclue$ euction of uncertainty
Imro&e ecisions Imro&e ability to lan an scheule acti&ities
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S+S"#S, )A"A, A() I(-%A"I%(
>enefits of information
? @ost of producing information
Aalue of information
!osts may inclue time an resources sent$ !ollecting ata
Processing ata Storing ata )istributing information to users
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S+S"#S, )A"A, A() I(-%A"I%(
>enefits of information
? @ost of producing information
Aalue of information!osts an benefits of information are oftenifficult to uantify, but you nee to try 'henyou3re ma4ing ecisions about 'hether to
ro&ie information
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!haracteristics that ma4e informationuseful$
ele&ance
It reuces uncertainty by heling you reict'hat 'ill haen or confirm 'hat alreay hashaene
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S+S"#S, )A"A, A() I(-%A"I%(
!haracteristics that ma4e informationuseful$
ele&ance
eliability
It3s eenable, ie, free from error or biasan faithfully ortrays e&ents an acti&ities
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S+S"#S, )A"A, A() I(-%A"I%(
!haracteristics that ma4e informationuseful$
ele&ance
eliability
!omleteness
It oesn3t lea&e out anything that3s imortant
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S+S"#S, )A"A, A() I(-%A"I%(
!haracteristics that ma4e informationuseful$
ele&ance
eliability
!omleteness
"imeliness+ou get it in time to ma4e your ecision
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S+S"#S, )A"A, A() I(-%A"I%(
!haracteristics that ma4e informationuseful$
ele&ance
eliability
!omleteness
"imeliness
*nerstanabilityIt3s resente in a manner you cancomrehen an use
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S+S"#S, )A"A, A() I(-%A"I%(
!haracteristics that ma4e informationuseful$
ele&ance
eliability
!omleteness
"imeliness
*nerstanability
5erifiability
A consensus notion6the nature of theinformation is such that ifferent eole
'oul ten to rouce the same result
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S+S"#S, )A"A, A() I(-%A"I%(
!haracteristics that ma4e informationuseful$ ele&ance
eliability !omleteness
"imeliness
*nerstanability 5erifiability
Accessibility
+ou can get to it 'hen you nee it an in aformat you can use
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!nformation is pro%ided to both:
0ternal users
!nternal users
S+S"#S, )A"A, A() I(-%A"I%(
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!nformation is pro%ided to both:
0ternal users
!nternal users
S+S"#S, )A"A, A() I(-%A"I%(
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0ternal users primarily use information
that is either:
-BC+DE !B;D-+!BFre
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!n pro%iding mandatory or essential
information, the focus should be on:
-inimi)ing costs.
-eeting regulatory re
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!nformation is pro%ided to both:
0ternal users
!nternal users
S+S"#S, )A"A, A() I(-%A"I%(
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!nternal users primarily use discretionary
information.
+he primary focus in producing this
information is ensuring that benefits
eceed costs, i.e., the information has
positi%e %alue.
S+S"#S, )A"A, A() I(-%A"I%(
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n !" is a system that collects, records,stores, and processes data to produceinformation for decision maers.
!t can: 9se ad%anced technologyH or
>e a simple paper?and?pencil systemH or
>e something in bet'een. +echnology is simply a tool to create,
maintain, or impro%e a system.
7HA" IS A( AIS
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It3s funamental to accounting
7H+ S"*)+ A!!%*("I(.I(-%A"I%( S+S"#S
Accounting is an information9ro&iingacti&ity, so accountants nee to
unerstan$ Ho' the system that ro&ies that
information is esigne, imlemente,an use
Ho' financial information is reorte
Ho' information is use to ma4eecisions
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It3s funamental to accounting
7H+ S"*)+ A!!%*("I(.I(-%A"I%( S+S"#S
%ther accounting courses focus on ho'the information is ro&ie an use
An AIS course laces greater emhasis on$ Ho' the ata is collecte an
transforme
Ho' the a&ailability, reliability, an
accuracy of the ata is ensure AIS courses are not number9crunchingcourses
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It3s funamental to accounting
"he s4ills are critical to career success
7H+ S"*)+ A!!%*("I(.I(-%A"I%( S+S"#S
Auitorsnee to e&aluate the accuracyan reliability of information rouce bythe AIS
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It3s funamental to accounting
"he s4ills are critical to career success
7H+ S"*)+ A!!%*("I(.I(-%A"I%( S+S"#S
"a: accountantsmust unerstan theclient3s AIS aeuately to be confient thatit is ro&iing comlete an accurateinformation for ta: lanning ancomliance 'or4
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It3s funamental to accounting
"he s4ills are critical to career success
7H+ S"*)+ A!!%*("I(.I(-%A"I%( S+S"#S
Inri&ate inustryannot9for9rofit,systems 'or4 is consiere the mostimortant acti&ity erforme byaccountants
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It3s funamental to accounting
"he s4ills are critical to career success
7H+ S"*)+ A!!%*("I(.I(-%A"I%( S+S"#S
Inmanagement consulting, the esign,selection, an imlementation ofaccounting systems is a rai gro'th area
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It3s funamental to accounting
"he s4ills are critical to career success
"he AIS course comlements othersystems courses
7H+ S"*)+ A!!%*("I(.I(-%A"I%( S+S"#S
%ther systems courses focus on esign animlementation of information systems,atabases, e:ert systems, antelecommunications
AIS courses focus on accountability an control
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It3s funamental to accounting
"he s4ills are critical to career success
"he AIS course comlements othersystems courses
AIS toics are teste on the ne' !PA
e:am
7H+ S"*)+ A!!%*("I(.I(-%A"I%( S+S"#S
a4es u about 2;< of the Business#n&ironment = !oncets section of the !PAe:am
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It3s funamental to accounting
"he s4ills are critical to career success
"he AIS course comlements othersystems courses
AIS toics are teste on the ne' !PA
e:am AIS toics imact cororate strategyan culture
7H+ S"*)+ A!!%*("I(.I(-%A"I%( S+S"#S
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AIS
%ccuational!ulture Strategy
Information"echnology
AIS esign isaffecte byinformationtechnology, the
organi>ation3sstrategy, an theorgani>ation3sculture
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AIS
%ccuational!ulture Strategy
Information"echnology
Information technologyaffects the comany3schoice of businessstrategy "o erformcost9benefit analyses onI" changes, you nee tounerstan businessstrategy
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AIS
%ccuational!ulture Strategy
Information"echnology
Although cultureaffects the esign ofthe AIS, it3s also true
that the AIS affectsculture by alteringthe isersion ana&ailability ofinformation
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+he obIecti%e of most organi)ations is to
pro%ide %alue to their customers.
What does it mean to deli%er %alue$
ets pee in on a con%ersation at Joes
pharmacy . . .
%?# %- "H# AIS I( "H# 5A?*# !HAI(
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%?# %- "H# AIS I( "H# 5A?*# !HAI(
7ell, r PharmaceuticalSalesman, your roosal loo4sgoo, but your rices are about
;< higher than your cometitors
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%?# %- "H# AIS I( "H# 5A?*# !HAI(
"hat3s true, but 'e3recomfortable 'ith thatbecause of the &alue9ae that 'e bring to
this arrangement
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%?# %- "H# AIS I( "H# 5A?*# !HAI(
7hat is that @&alue9ae,an ho' o you con&ert it
into ollars
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%?# %- "H# AIS I( "H# 5A?*# !HAI(
Blah6blah6blahcustomer ser&iceblah6blah6blah
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lthough Kadding %alueL is a commonly usedbu))'ord, in its genuine sense, it means maingthe %alue of the finished component greater thanthe sum of its parts.
!t may mean: -aing it faster -aing it more reliable 4ro%iding better ser%ice or ad%ice
4ro%iding something in limited supply (lie ?negati%eblood or rare gems# 4ro%iding enhanced features @ustomi)ing it
%?# %- "H# AIS I( "H# 5A?*# !HAI(
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Aalue is pro%ided by performing a series of
acti%ities referred to as the value chain.
+hese include:
4rimary acti%ities
"upport acti%ities
+hese acti%ities are sometimes referred to
as KlineL and KstaffL acti%ities respecti%ely.
%?# %- "H# AIS I( "H# 5A?*# !HAI(
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Aalue is pro%ided by performing a series of
acti%ities referred to as the value chain.
+hese include:
4rimary acti%ities
"upport acti%ities
+hese acti%ities are sometimes referred to
as KlineL and KstaffL acti%ities respecti%ely.
%?# %- "H# AIS I( "H# 5A?*# !HAI(
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4rimary acti%ities include:
!nbound logistics
%?# %- "H# AIS I( "H# 5A?*# !HAI(
ecei&ing, storing, an istributing thematerials that are inuts to theorgani>ation3s rouct or ser&ice
-or a harmaceutical comany, this acti&ity
might in&ol&e hanling incoming chemicalsan elements that 'ill be use to ma4e theirrugs
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4rimary acti%ities include:
!nbound logistics
perations
%?# %- "H# AIS I( "H# 5A?*# !HAI(
"ransforming those inuts into roucts orser&ices
-or the harmaceutical comany, this ste
in&ol&es combining the ra' chemicals anelements 'ith the 'or4 of eole an euiment torouce the finishe rug rouct that 'ill be solto customers
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4rimary acti%ities include:
!nbound logistics
perations
utbound logistics
%?# %- "H# AIS I( "H# 5A?*# !HAI(
)istributing roucts or ser&ices to customers
-or the harmaceutical comany, this ste in&ol&esac4aging an shiing the goos to rug stores,octors, an hositals
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4rimary acti%ities include:
!nbound logistics
perations
utbound logistics
-areting and sales
%?# %- "H# AIS I( "H# 5A?*# !HAI(
Heling customers tobuy the organi>ation3s
roucts or ser&ices
A harmacy re may&isit 'ith rug stores,octors, etc to inform
them about theirroucts an ta4eorers
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4rimary acti%ities include:
!nbound logistics
perations
utbound logistics
-areting and sales
"er%ice
%?# %- "H# AIS I( "H# 5A?*# !HAI(
Post9sale suort ro&ie tocustomers such as reair anmaintenance function
A harmaceutical firm 'illtyically not be reairing it3srouct Cthough the rouct maybe erioically reformulateD
"he harmaceutical comany ismore li4ely to be ro&iinga&isory ser&ices to harmacists,etc
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Aalue is pro%ided by performing a series of
acti%ities referred to as the value chain.
+hese include:
4rimary acti%ities
"upport acti%ities
+hese acti%ities are sometimes referred to
as KlineL and KstaffL acti%ities respecti%ely.
%?# %- "H# AIS I( "H# 5A?*# !HAI(
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"upport acti%ities include:
;irm infrastructure
%?# %- "H# AIS I( "H# 5A?*# !HAI(
Accountants, la'yers, an aministration
Inclues the comany3s accountinginformation system
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"upport acti%ities include:
;irm infrastructure
&uman resources
%?# %- "H# AIS I( "H# 5A?*# !HAI(
In&ol&es recruiting an hiring ne'emloyees, training emloyees, ayingemloyees, an hanling emloyee benefits
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"upport acti%ities include:
;irm infrastructure
&uman resources
+echnology
%?# %- "H# AIS I( "H# 5A?*# !HAI(
Acti&ities to imro&e the roucts or ser&icesCeg, =), 7eb site e&elomentD
-or the harmaceutical comany, these acti&ities'oul inclue research an e&eloment tocreate ne' rugs an moify e:isting ones
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"upport acti%ities include:
;irm infrastructure
&uman resources
+echnology
4urchasing
%?# %- "H# AIS I( "H# 5A?*# !HAI(
Buying the resources Ceg,materials, in&entory, fi:eassetsD neee to carry out theentity3s rimary acti&ities
In the harmaceutical comany,the urchasing fol4s are tryingto get the best combination of
cost an uality in buyingchemicals, sulies, an otherassets the comany nees torun its oerations
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!nformation technology can significantly
impact the efficiency and effecti%eness
'ith 'hich the preceding acti%ities are
carried out. n organi)ations %alue chain can be
connected 'ith the %alue chains of its
customers, suppliers, and distributors.
%?# %- "H# AIS I( "H# 5A?*# !HAI(
.oo AIS &alue chain$
*PS sens o&er E1 billion a year on
information systems resulting in greatercustomer control o&er eli&ery, higherri&er roucti&ity, an lo'er costs
Ba AIS &alue chain$ ?imite Brans tangle integration of o&er F0
incomatible information systems resulte inG00 trailers trying to am into a 1;0 trailer lot
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Pharmaceuticals, Inc
!nbound ogistics
perations
utbound ogistics
-areting M "ales
"er%ice
%?# %- "H# AIS I( "H# 5A?*# !HAI(
Smith Suly !o
!nbound ogistics
perations
utbound ogistics
-areting M "ales"er%ice
!ustomer Pharmacy
!nbound ogistics
perationsutbound ogistics
-areting M "ales
"er%ice
-or e:amle, the inboun logistics ofPharmaceuticals, Inc, lin4s to theoutboun logistics of its suliers
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Pharmaceuticals, Inc
!nbound ogistics
perations
utbound ogistics
-areting M "ales
"er%ice
%?# %- "H# AIS I( "H# 5A?*# !HAI(
Smith Suly !o
!nbound ogistics
perations
utbound ogistics
-areting M "ales"er%ice
!ustomer Pharmacy
!nbound ogistics
perationsutbound ogistics
-areting M "ales
"er%ice
An the outboun logistics ofPharmaceuticals, Inc, lin4s to the inbounlogistics of its customers
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Pharmaceuticals, Inc
!nbound ogistics
perations
utbound ogistics
-areting M "ales
"er%ice
%?# %- "H# AIS I( "H# 5A?*# !HAI(
Smith Suly !o
!nbound ogistics
perations
utbound ogistics
-areting M "ales"er%ice
!ustomer Pharmacy
!nbound ogistics
perationsutbound ogistics
-areting M "ales
"er%ice
"he lin4ing of these searate &alue chainscreates a larger system 4no'n as a sulychain
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Pharmaceuticals, Inc
!nbound ogistics
perations
utbound ogistics
-areting M "ales
"er%ice
%?# %- "H# AIS I( "H# 5A?*# !HAI(
Smith Suly !o
!nbound ogistics
perations
utbound ogistics
-areting M "ales"er%ice
!ustomer Pharmacy
!nbound ogistics
perationsutbound ogistics
-areting M "ales
"er%ice
"he lin4ing of these searate &alue chainscreates a larger system 4no'n as a sulychain
Informationtechnology can
facilitate synergisticlin4ages that imroðe erformance ofeach comany3s &aluechain
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+here is %ariation in the degree of
structure used to mae decisions:
"tructured decisions
%?# %- "H# AIS I( "H# 5A?*# !HAI(
eetiti&e an routine
!an be elegate to lo'er9le&el emloyees
#AP?#$ )eciing 'hether to 'rite an autoinsurance olicy for a customer 'ith a cleanri&ing history
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+here is %ariation in the degree of
structure used to mae decisions:
"tructured decisions
"emistructured decisions
%?# %- "H# AIS I( "H# 5A?*# !HAI(
Incomlete rules
euire subecti&e assessments
#AP?#$ )eciing 'hether to sell autoinsurance to a customer 'ith a tainteri&ing history
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+here is %ariation in the degree of
structure used to mae decisions:
"tructured decisions
"emistructured decisions
"tructured decisions
%?# %- "H# AIS I( "H# 5A?*# !HAI(
(on9recurring an non9routine
euire a great eal of subecti&eassessment
#AP?#$ )eciing 'hether to beginselling a ne' tye of insurance olicy
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+here is also %ariation in the scope of a
decisions effect:
ccupational control decisions
%?# %- "H# AIS I( "H# 5A?*# !HAI(
elate to erformance of secific tas4s
%ften of a ay9to9ay nature
#AP?#$ )eciing 'hether to orerin&entory
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+here is also %ariation in the scope of a
decisions effect:
ccupational control decisions
-anagement control decisions
%?# %- "H# AIS I( "H# 5A?*# !HAI(
elate to utili>ing resources to accomlishorgani>ational obecti&es
#AP?#$ Bugeting
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+here is also %ariation in the scope of a
decisions effect:
ccupational control decisions
-anagement control decisions
"trategic planning decisions
%?# %- "H# AIS I( "H# 5A?*# !HAI(
"he @'hat o 'e 'ant to be 'hen 'e gro'u tyes of uestions
In&ol&es establishing$ %rgani>ational obecti&es
Policies to achie&e those obecti&es
#AP?#$ )eciing 'hether to i&ersify thecomany into other rouct lines
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!n general, the higher a manager is in the
organi)ation, the more liely heNshe is to
be engaging in:
ess structured decisions
>roader scope (i.e., strategic planning#
decisions
%?# %- "H# AIS I( "H# 5A?*# !HAI(
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@orporations ha%e: 9nlimited opportunities to in%est in
technology.
imited resources to in%est in technology. @onse
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-ichael 4orter suggests that there are t'o
basic business strategies companies can
follo':
4roduct?differentiation strategy
o'?cost strategy
"H# AIS A() !%P%A"# S"A"#.+
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-ichael 4orter suggests that there are t'o
basic business strategies companies can
follo':
Prouct9ifferentiation strategy o'?cost strategy
"H# AIS A() !%P%A"# S"A"#.+
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product?differentiation strategy in%ol%es
setting your product apart from those of
your competitors, i.e., building a KbetterL
mousetrap by offering one thats faster,has enhanced features, etc.
"H# AIS A() !%P%A"# S"A"#.+
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-ichael 4orter suggests that there are t'o
basic business strategies companies can
follo':
4roduct?differentiation strategy
?o'9cost strategy
"H# AIS A() !%P%A"# S"A"#.+
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lo'?cost strategy in%ol%es offering a
cheaper mousetrap than your competitors.
+he lo' cost is made possible by
operating more efficiently.
"H# AIS A() !%P%A"# S"A"#.+
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"ometimes a company can do both, but
they normally ha%e to choose.
"H# AIS A() !%P%A"# S"A"#.+
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4orter also argues that companies must
choose a strategic position among three
choices:
Aariety?based strategic position
"H# AIS A() !%P%A"# S"A"#.+
%ffer a subset of the inustry3sroucts or ser&ices
#AP?#$ An insurance comanythat only offers life insurance asoose to life, health, roerty9casualty, etc
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4orter also argues that companies must
choose a strategic position among three
choices:
Aariety?based strategic position
(ees9base strategic osition
"H# AIS A() !%P%A"# S"A"#.+
Ser&e most or all of the nees of a articulargrou of customers in a target mar4et
#AP?#$ "he original -arm Bureau9baseinsurance comanies ro&ie a ortfolio ofinsurance an financial ser&ices tailore to thesecific nees of farmers
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4orter also argues that companies must
choose a strategic position among three
choices:
Aariety?based strategic position
Beeds?based strategic position
Access9base strategic osition
"H# AIS A() !%P%A"# S"A"#.+
Ser&e a subset of customers 'ho iffer fromothers in terms of factors such as geograhiclocation or si>e
#AP?#$ Satellite Internet ser&ices areintene rimarily for customers in rural areas'ho cannot get )S? or cable ser&ices
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4orter also argues that companies must
choose a strategic position among three
choices:
Aariety?based strategic position
Beeds?based strategic position
ccess?based strategic position
"hese strategic ositions are notmutually e:clusi&e an can o&erla
"H# AIS A() !%P%A"# S"A"#.+
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@hoosing a strategic position is importantbecause it helps a company focus its efforts as
opposed to trying to be e%erything to e%erybody.
03-40: radio station that tries to play all typesof music 'ill probably fail.
!ts critical to design the organi)ations acti%ities
so they reinforce one another in achie%ing the
selected strategic position. +he result is synergy,'hich is difficult for competitors to imitate.
"H# AIS A() !%P%A"# S"A"#.+
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+he gro'th of the !nternet has profoundlyaffected the 'ay %alue chain acti%ities areperformed: !nbound and outbound logistics can be streamlined
for products that can be digiti)ed, lie boos andmusic. +he !nternet allo's companies to cut costs, 'hich
impacts strategy and strategic position. >ecause the !nternet is a%ailable to e%eryone, intense
price competition can result. +he outcome may bethat many companies shift from lo'?cost to product?differentiation strategies.
+he !nternet may impede access?based strategicpositions.
"H# AIS A() !%P%A"# S"A"#.+
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+he !" should help a company adopt and
maintain its strategic position.
De
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+he authors belie%e:
ccounting and information systems should
be closely integrated.
+he !" should be the primary informationsystem to pro%ide users 'ith information they
need to perform their Iobs.
"H# AIS A() !%P%A"# S"A"#.+
S*A+
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S*A+
What 'e%e learned so far: +he meaning of system, data, and information.
What an !" is.
Why its an important topic to study. What its role is in the %alue chain.
&o' it pro%ides information for decision maing.
What are the basic strategies and strategic positions
an organi)ation can pursue. &o' these interact 'ith the !".