Summary Accounting Information Systems And Internal Control (320060-B-6)

Summary
Auditing & accounting information systems

Chapter 1
Information provision = the systematic gathering, recording and processing of data aimed at
the provision of information for management decision-making, operating the entity and
controlling it, including accountability.

3 purposes of information provision
 Information for delegation and accountability
 Decision-making
 Operating business

Data = most elementary representation of applicable parts of reality that does not have
meaning until it is processed

Information = all the processed data that contributes to the recipients understanding of
applicable parts of reality

IT = all the electronic media used to input, process and store data, to provide information,
and to support or enable communication

System = organized collection of connected components that form a more complex whole,
aimed at attaining certain goals

Information system = organized collection of software and hardware for inputting,
processing and storing data, and providing information aimed at the attainment of
organizational goals

Accounting information is based on data from business events
Business event = an action by an organization or one or more of its transaction
counterparties, that impacts or will impact the state of the organization

AIS = study that focuses on the IT-based processes that are aimed at: providing information
to internal and external stakeholders that complies with specified quality criteria, and
creating the right conditions for effective and efficient delegation and accountability,
decision-making, and operating the business

Accounting information system = organized collection of software and hardware for
inputting, processing, and storing data on business events, aimed at providing information to
internal and external stakeholders that complies with specified quality criteria, and creating
the right conditions for effective and efficient delegation and accountability, decision-
making, and operating the business

Control  backward and forward looking
Backward = comparing “what is” and “what should be”

,Forward = decision-making, enhancing future organizational performance
Control by managers = the continuous realization of legitimized goals through deliberate and
cooperative actions by organization members

Governance = the process of keeping an organization on track towards legitimized goals

Information-based Control Framework
Consists of 3 dimensions
 Strategy formulation vs strategy implementation  external and internal
environment, strategies into concrete actions
 Business domain, information and communication domain, data domain, IT domain
 To audit and control, aligns actual state with applicable normative framework




Quality important to integrate in model
 Quality is a perception, subjective concept
 Quality has a positive connotation  higher quality is always better
Using quality in the model, comparing intended business or information strategy with the
quality criteria for the operations or information

Quality of operations
 Efficiency and effectiveness of internal processes
 Innovative power
 Customer satisfaction
 Financial performance

Quality of information
 Effectiveness
o Reliability
 Validity  only existing events are recorded, processed, and reported
upon
 Accuracy  free from mathematical errors
(transposition/OCR/conversion errors)
 Completeness  every event is recorded, processed, and reported
upon
o Relevance
 Precision  higher level of detail, higher level of hierarchy less precise
the information is

,  Timeliness  timely enough to affect the decision-making process
 Understandability  useful for and intelligible to its user,
unambiguous interpretability of information
 Efficiency  economically justified, lowest possible costs

Quality of data
 Input
o Validity  data on business events that represent events in accordance with
business rules
o Accuracy  free from mathematical, conversion, and transcription errors
o Completeness  all valid business events are captured in data
 Update
o Accuracy  correctly recording of business events in applicable master files
o Completeness  all valid business events are recorded in applicable master
files
 Efficiency  economically justified and produces at lowest possible costs

Quality of IT infrastructure
 Technology
o Confidentiality  only authorized people have access; confidential
information should not become at disposal of people who want to use it to
their own advantage
o Integrity  highly reliable data (validity, accuracy, and completeness of
information and data)
o Availability  at intended user’s disposal at the right time and place
 Organization
o Scalability  adding resources to IT infrastructure to handle more data
without hampering its operational effectiveness
o Maintainability  the degree to which IT infrastructure can be tested,
renewed, and changed at reasonable cost
o Transferability  conversion from one environment to another; easy
adjustment to changing situational conditions
 Efficiency  costs of IT investments are in control (not exceeding budget)
 Compliance  laws and regulations regarding computer crime, and privacy

Chapter 2
Committee of Sponsoring Organizations of the Treadway Commission = COSO-report  have
management report on the effectiveness of its internal controls to create greater
management awareness of a few important elements in an internal control system
 Control environment
 Audit committee
 Codes of conduct
 Internal audit

Internal control = a process, effected by an entity’s board of directors, management, and
other personnel, designed to provide reasonable assurance regarding the achievement of
objectives relating to operations, reporting, and compliance