Solution Manual For Accounting Information Systems, Question And Answers

Solution Manual For Accounting Information Systems, Question And Answers Characteristics of useful information Relevant: Reduces uncertainty, improves decision-making, or confirms or corrects prior expectations. Reliable: Free from error or bias; accurately represents organisation events or activities. Existence: The transactions, assets, obligations and equity generated in the system exist. Valid: Only those transactions and reports that are authorised by the firm should be processed. Complete: Does not omit important aspects of the events or activities it measures. Timely: Provided in time for decision-makers to make decisions. Measurable: Transactions, assets, liabilities, and equities processed in the system are measured accurately. Understandable: Presented in a useful and intelligible format. Verifiable: Two independent, knowledgeable people can produce the same information. Accessible: Available to users when they need it and in a format they can use Input-processing-output (IPO) Model Where information systems receive inputs, process those inputs and use those processed inputs to generate outputs. Inputs: Are the starting point of a system. The primary inputs are the data extracted from each business transaction as it occurs. Processing: Refers to activities that are preformed on the inputs into the system Outputs: refer to what is obtained from a system, or result of what the system does. Control system: is the interacting with inputs, processes and outputs, it is a set of checks and balances that ensure the system is running as expected Business process A business process is a series of interlocking activities that work together, across the organisation, to achieve some predetermined organisational goal. This predetermined goal is typically defined around satisfying customer need 3 main business processes 1. Sale process/Revenue transaction cycle 2. Purchasing process/purchasing transaction cycle 3. General Ledger and reporting process What is a system? A system is an organised set of principles or procedures created and used to carry out a specific activity. What is an Accounting Information system A system that captures, records processes and reports accounting information Components of an AIS 1. People using the system 2. Procedures and instructions (For collecting, processing, and storing data) 3. Data 4. Software 5. IT Infrastructure (Computers, peripherals, networks, and so on) 6. Internal Control and Security (Safeguard the system and its data) Business functions of an AIS Collect and store data about organisational activities, resources and personnel Transform data into information enabling management to plan execute, control and evaluate their activities, resources and personnel Provide adequate control to safeguard assets and data Definition of Accounting information system Can best be defined as the application of technology to the capturing, verifying, storing, sorting and reporting of data relating to an organisations activities AIS and Corporate strategy Organisation have limited resources, therefore investments to AIS should have greatest impact on ROI. Organisation need to understand: IT developments Business strategy Organisational culture They will effect and be effected by new AIS Data v Information Data are facts that are collected, recorded, stored and processed: - Insufficient for decision making Information is processed data used in decision making: - Too much information however, will make it more, not less, difficult to, make decisions. This is known as "data overload" or "information overload". Value of information Benefits: Reduce uncertainty, improve decisions Costs: Time and resources, produces information Sale process/Revenue transaction cycle Aim: To sell goods to the customer and collect cash from sales. Participants: Sales staff, customer, billing staff, warehouse. Inputs: Sales order. Outputs: Invoice, receipt, shipping document. Purchasing process/purchasing transaction cycle Aim: To acquire goods from suppliers and manage stock in order to sell to customers and avoid stock-outs. Participants: Warehouse staff, purchasing staff, sales staff, vendor. Inputs: Purchase requisition, back-order. Outputs: Purchase order. General ledger and reporting process The general ledger and financial reporting cycle commences when budgets are created and ends when reports have been generated and distributed. During this cycle all data needs to be validated and correctly input and transferred. Adjusting journal entries must be prepared accurately and independently authorised. Reports must be well designed and contain relevant and accurate data. Internal Controls An organization's financial resources can be protected from loss, waste or theft by; developing an internal control system and implementing it within its AIS. An internal control system ensures reliable data processing and promotes operational efficiency An internal control is a process which is effected by; a board of directors, management and other personnel An internal control is a process which provides reasonable assurance in; effectiveness and efficiency, reliability of financial reporting and Compliance with applicable laws and regulations Objectives of internal Control Safeguard assets Maintain records in sufficient detail to report company assets accurately and fairly Provide accurate and reliable information Prepare financial reports in accordance with established criteria Promote and improve operational efficiency Encourage adherence to prescribed managerial policies Comply with applicable laws and regulations Three main frameworks used to develop internal control system 1. Control Objectives for information and related technology (COBIT) 2. Committee of sponsoring organisations (COSO)'s internal control framework 3. COSO's enterprise risk management framework Control Objectives for information and related technology (COBIT) This framework address control from three main points; business objectives, IT resources and IT processes. COSO's internal control framework Develop five components under this framework: I. Control environment The Control Environment - establishes the tone of a company, - influences the control awareness of the employees. Factors included within the control environment are: - Integrity, ethical values and competence of employees - Management philosophy and operating style - Assignment of authority and responsibility - The attention and direction provided by the board of directors II. Control activities Control activities are the policies and procedures that ensure; - Management directives are carried out - Protection of the assets of the firm Control activities includes a combination of - Manual controls - Automated controls Control activities can be categorised as; - approvals, - authorisations, - verifications, - reconciliations, - reviews of operating performance, an