Solution Manual for Accounting Information.pdf

SOLUTIONS FOR CHAPTER 1 Discussion Questions DQ 1-1 “I just want to be a good accountant, technology does not interest me.” Comment on this statement, considering today’s technology environment. ANS. Possible points that could be made: a. Distinguish between an accountant and a bookkeeper. An understanding of accounting software and related technology would enable one to advance beyond entry-level positions. b. Without knowledge of computer technology, an accountant can be a bookkeeper/accountant for a small firm that does not use computers at all. (With the ubiquitous nature of computers, this has become a weak argument, at best.) More realistically, with the low cost of accounting software, only very select organizations may not benefit from automation. Examples of those organizations would include businesses that sell a low volume of unique products. c. Because the ability to access data, present data for decision making, audit an accounting system, and so on are all affected by computer technology, the career path for an accountant will be severely limited by a lack of knowledge of computer technology. d. The public accounting profession is competitive and the effective use of technology helps maintain a competitive edge. For example, an auditor can usually complete an audit engagement in less time—and be surer of the findings—than he/she would be without using technology in the audit. This will permit the auditor to charge less for the work and to obtain more clients. And, if the auditor’s findings can be supported, he/she will be less likely to experience legal ramifications (e.g., from the SEC, from stockholders, and so on). e. The Sarbanes-Oxley Act of 2002 requires that the CFO (and CEO) sign the financial statements and attest to their accuracy, that companies notify the Securities and Exchange Commission of material events within two days, and that companies file their earnings statements within 35 days of the end of a quarter. All of these requirements have implications for the organization’s accounting information system and the ability of the CFO to understand and monitor its operation. DQ 1-2 Examine Figure 1.1. Based on any work experience you have had, with which elements are you least comfortable? With which are you most comfortable? Discuss your answers. ANS. See DQ 1-3. DQ 1-3 Examine Figure 1.1. Based on your college education to date, with which elements are you comfortable? With which are you least comfortable? Discuss your answers. ANS. The point of both of these questions (DQ 1-2 and DQ 1-3) is to get the students to see the breadth of coverage of the AIS course and to see how the course will help fill in gaps in their background that they may have. Also, the figure and the discussion should help the student recognize the practical and academic background that needs to be brought forward into this course. For example, students with practical experience may have a good background in business operations, information processing, and management decision making. Students with computer coursework or practical experience may have background in databases and technology. If the students have completed intermediate accounting, accounting principles and reporting may be familiar. DQ 1-4 Why might you have more trouble assessing the success of a not-for-profit organization or federal government entitlement program than you would have judging the success of a business organization? ANS. The purpose of this question is to get the students to understand the relationship of “success” and “accomplishing specific objectives.” The issues are similar for any organization. After we move beyond generally accepted, easily measured objectives, we will have difficulty determining effectiveness. We must establish objectives and criteria or indicators that can measure our success in achieving the objectives. A business organization either explicitly or implicitly establishes objectives such as market share, profits, and earnings per share. Measuring achievement of these objectives is fairly straightforward. The objectives for a federal government entitlement program or not-for-profit (NFP) organization are often subjective and may not be acknowledged by all parties. And measures of success may be elusive. For example, are programs for the NFP successful when the number of people assisted is high or when the number is low, or does it depend on the program? The Red Cross helps with disaster relief on a large scale as well as operating smaller programs such as a local blood drive. Or do we measure performance on the basis of program costs per person assisted? Without an acknowledged set of objectives and measurable success criteria, we have difficulty knowing we have been effective. Solutions for Chapter 1 For non-private (governmental) organizations there is some guidance available to directly address this issue. The Government Performance and Results Act of 1993 (P.L. 103-62) was enacted to “provide for the establishment of strategic planning and performance measurement in the U.S. Federal Government.” To comply with this act, the managers of all agencies of the federal government must prepare fiveyear strategic plans setting forth the goals and objectives that measure mission achievement and the approaches that will be used in achieving those goals. Annual plans must include performance indicators and a statement of how measured values will be verified. A business, or any nongovernmental organization, may take on broader social responsibilities and establish related objectives. These objectives might include those for environmental impact, treatment of employees, relations with unions, and impact on the surrounding community. Measurement of achievement of such objectives can be problematic. DQ 1-5 Why must you have knowledge of a system’s objectives to study that system? ANS. With this question, we try to establish the connection between a system’s purpose and its procedures. Understanding and evaluating a system’s procedures must be studied in light of the system’s objectives. For example, in an accounts receivable process, we periodically send customer statements and follow up on delinquent receivables found in those statements. Why? To ensure timely receipt of all outstanding receivables (i.e., an accounts receivable process objective).