Accounting Information Systems A Practitioner Emphasis, 7e CynthiaHeagy
l l l l l l l l
Constance Lehmann (Solutions Manual All Chapters, 100% Original
l l l l l l l l
Verified, A+ Grade) l l l
Chapter 1 l
Significance of Accounting Information Systems and the
l l l l l l
Accountant’s Role
l l
INTRODUCTORY lSCENARIO: lSUGGESTED lSOLUTIONS lTO lQUESTIONS
1. Employee lovertime lhours, lcustomer linformation l(e.g., lage lgroups), linventory llevels, lreorder lpoints, lEOQ
lcalculation, lvolume/quantity ldiscount lanalysis, lsquare lfootage lin luse lv. lstorage, lcustomer lflow ldata,
lspoilage
2. How lmuch lis lclient lwilling lto lpay? lSystem lthat lis leasy lfor lservers lto luse lwith lproper lcontrols. lBob’s lhourly
lrate lwould lbe la lconcern lfor lclient. lWill lBob lbe laround l“after lthe lsale” l(i.e., ltech lsupport)? lWhat ltypes lof
lpre-packaged lsystems lare lavailable?
3. Information lto lhelp lwith lsoftware ldivision l(e.g., ltotal lsales ldollars, lcomplexity lof laccounting lsystem). lHow
lmany lcomputers lneeded? lAny lexpansion lplanned? lWhat ltypes lof lemployees ldo lthey lhave l(e.g., lwaiters
lwould lwant lquick ltouch lscreens)?
4 The lowner lof lthe lrestaurant lwants la lnew laccounting lsystem lbecause lhe lneeds lup-to-date linformation lon
lhow lthe lbusiness lis ldoing. l Waiting luntil lthe lend lof lthe lyear, lor leven lthe lquarter, ldoes lnot lgive lMarshall
lthelinformation lhe lneeds lto lmake lthose lday-to-day ldecisions lthat lwill lensure lthe lsuccess lof lhis lrestaurant.
CHAPTER lVIGNETTES: lSUGGESTED lRESPONSES lTO lQUESTIONS
Vignette l1.1
1. Closer lrelationships lwith lremaining lsuppliers, lthe lability lto lcarry lless linventory l(reducing lcarrying lcosts
land lrisks lof ltheft lor lloss lof linventory), lsharing lof lplanning linformation lwith lsuppliers, leasier lto
lmonitorlvendor lperformance. lMight llose lvolume ldiscounts lif ltrying lto lminimize linventory lon lhand lby
lhaving lsmaller lshipments lfrom lvendors lshipped lmore loften.
2. Reduction lin lpaperwork, lreduction lin linput lerrors, lordering land lcash lreceipt lprocesses lmore lefficient,
lincreases lin lefficiency lin lmeeting lchanges lin ldemand. lOne ldisadvantage lwould lrelate lto lproblems
lwithlsettling ldisputed lorders lor lpayments lwith lloss lof l“paper ltrail” lthat lincludes lauthorized lsignatures.
Vignette l1.2
1. Managers lwould lprobably lfind linformation lin lunits lto lbe lmost luseful lfor lplanning ldecisions lbecause lthis
linformation lwould lrepresent lthings lover lwhich lhe/she lhas lcontrol. lWhile lthe lmanager lmight lnot lhave
lcontrol lover lsalaries, lhe/she ldoes lhave lcontrol lover lthe lamount lof lovertime land lthe lapproval lof lvacation
loflthe lemployees.
2. Managers lwould lprobably lwant linformation lrelated lto lproduction lnumbers l(to ldetermine lseasonality;
lduring lslow ltimes, lmore lemployees lcould lbe lon lvacation), lthe lnumber lof lvacation lhours lper lemployee,
lthelnumber lof lovertime lhours lper lemployee, lbackorder linformation, land linformation lto lhelp lthe lmanager
lmatch lstaffing llevels lwith lproduction.
Vignette l1.3
1. The lprivacy lof linformation lis la lmajor lconsideration, las lthe lcustomer lmight lnot lwant ltheir lspending lpattern
linformation lshared lwith lother lparties. lLoss lof lconfidential linformation lcan lbe ldisastrous lto la lcompany’s
lreputation land llead lto lsignificant lfinancial llosses l(lost lsales, lfines, letc.) lInformation labout lcustomers
lmustlbe lprotected lfrom linformation lleakage lto lother lthird lparties lwho lgain lauthorized l(or lunauthorized)
laccess
, to linformation. lAt lthe lvery lleast, lconfidential linformation labout lthe lcustomers lshould lbe lencrypted land
lhave llimited laccess.
2. Inventory lmanagement l(e.g., lturnover, lobsolescence, lsupply/demand, lreorder llevels), lpotential lmarkets lor
lproduct llines lfor lexpansion, lfrequent lbuyer lprograms.
Vignette l1.4
1. The lsituation lcould lhave lbeen lavoided lif lemployees lhad lbeen lpart lof lthe ldecision-making land ltesting
learlylin lthe lproject. lEmployee lbuy-in lis lessential lto lthe lsuccess lof lany lnew lsystem limplementation. lIt lis
lkey lthatlthe lsystem lprovide lmanagers lwith linformation lthat lthey lneed lfor ldecision-making. lIt lis lalso
limportant lto lhave la lmaintenance lcontract lin lplace, lwith lbetter lreporting lto lmanagement land lregular
lfollow-up. lIt lappears lthat lthis ldecision lwas lnot lmade lby lexecutive lmanagement, lso lits lsuccess lwas
lquestionable lsince
the l“tone lat lthe ltop” lwith lregard lto lthe lproject lwas l“ignorance”. l Since lexecutive lmanagement ldid lnot
lmonitor lthe lproject, lthey lcould lnot lrespond lto lKluger’s lcomplaints, lnor lcould lthey lprovide l“strong
encouragement” lfor lcontinuation lof lthe lproject loriginally lstarted lby lLehmann. lIn lfact, lit lappears lthat
lexecutive lmanagement lwas lnot linvolved lin lthe ldecision lto ltake lon lthe lnew lsystem. lKluger lwas lnot
lgivenlthe lopportunity lto llearn lthe lnew lsystem, lnor lwas lthere lmotivation lto llearn lthe lnew lsystem. lThe
lcompanylalso lhad linadequate lbackup lso lthat lthe lproject lcould lcontinue lin lthe labsence lof la lkey
lemployee.
2. .Here lare lsome lsuggested l“next lsteps”
• Improve lthe lgovernance lprocess land lthe l“tone lat lthe ltop” lto lget lexecutive lmanagement linvolvement land
loversight lof lsystem lprojects—this lincludes laligning lany lsystem lprojects lwith lthe lstrategy lof lthe
lcompany
• Determine lthat lany lsystem lchosen lby lmanagement lwill lprovide lquality linformation luseful lfor
ldecision-lmaking lat lall llevels
• Reinstate lthe lmaintenance lcontract land lset lup la ltraining lcontract lif lit lis ldetermined lmore lcost-effective
landlin lline lwith lthe lcompany lbusiness lplan lto luse lthe lnew lsystem
• Provide ltraining land lemployee linvolvement lin ldeveloping lthe lsystem
• Provide lbetter loversight lof lthe lcontroller lfunction
Vignette l1.5
1. The lredesign lprocess lcan lbe limproved lusing lthe lfollowing lsuggestions:
• Set lup lend-user lgroups lto lget linput lregarding loutput lneeds, ldata lcollection lneeds, lscreen, land lform llayouts
• Develop la lschedule lof ltests lto lbe lconducted lwith lrepresentative lend lusers lfor lpilot ltesting
• Allow lend luser linput lfor lchanges land limprovements lto lsystem
• Set lup ltraining lfor lall laffected lemployees
• Get lmanagement land lprogrammer lbuy-in lfor lessential lcontrols land laudit ltrails lat lthe lfront lend lof
ldevelopment
• Emphasize lthe limportance lof lcontrols, lprotection lof linformation lassets, land lprotection lof
lconfidential/private linformation
SOLUTIONS lTO lDISCUSSION lQUESTIONS lAND lPROBLEMS
1. The lproject lthat lFinkelstein land lAssociates lis lconsidering lis la lcapital linvestment lthat lrequires linformation
lon lthe lestimated linitial linvestment land lthe lestimated lfuture lreturn. l The lfuture lreturn lwould lbe lmeasured
lbylnet lincremental lcash lflows lto lthe lmall l(incremental lcash linflows lless lincremental lcash loutflows).
Estimated linitial linvestment lwould linclude:
• Architects lfees
• Renovation lof lexisting lfacilities
• Construction lof lnew lfacilities land lfood lcourt
• Cost lof ldisruption lof ltrade lduring lproject
, Estimated lnet lincremental lcash lflows lwould linclude:
Cash linflows:
• Increased lstore lrents lfrom lexisting lfacilities
• Rents lfrom lnew lfacilities land lfood lcourt
Less lcash loutflows:
• Increased ljanitorial lcosts
• Increased lsecurity lcosts
Estimates lof lthe lfuture lcash linflows land loutflows lcould lbe lbased lon lthe lmall's lhistorical laccounting
ldata.lEstimates lof lthe lrenovation land lconstruction lcosts lwould lbe lbased lprimarily lon lthe larchitect's
ljudgment land lexperience. lIt lwould lbe ldifficult lto lmake lprecise lestimates lof lthe lcost lof ltrade ldisruption,
lalthough lsome ldata lmay lbe lavailable lfrom lindustry lsources. lAdditional luseful linformation lwould
linclude ldemographic ldata lfor lthe llocal lcommunity land lestimates lof llocal leconomic lactivity land
lconsumer lbuyinglpower.
2. a. land lb.
Purchasing ldata lmight lreveal lthe ldegree lof lcompetition lamong lvendors land lvendors' lpricing lpolicies. l An
lorganization lmight ldecide lto lintegrate lvertically lby lbuying lan lequity lposition lin lkey lvendors lor lby
lproducing lsome lof lthe lneeded lgoods land lservices litself.
Perpetual linventory lrecords lindicate linventory lcarrying lcosts land lmight lreveal lbuying lpatterns lfor ldifferent
lclasses lof lgoods. lAn lorganization lmight ldecide lto ldrop lsome lproduct llines lthat lare lexpensive lto lcarry lin
linventory land lfor lwhich ldemand lis ldecreasing, lerratic, lor lhighly lseasonal.
Manufacturing lcost ldata lmight lshed llight lon lan lorganization's lability lto lcompete lin lits lmarket. lAn
lorganization lwith lunusually llow lmanufacturing lcosts, lbecause lof la lhigh ldegree lof lautomation lor lfor lother
lreasons, lwould lenjoy la ldistinct lcompetitive ladvantage.
Customer lcredit land laccounts lreceivable ldata lcontain lvaluable linformation lon lcustomers' lfinancial
lcondition. lAn lorganization lwould lwish lto ltarget lhigh-income lcustomers lor lcustomers lwith lgood lcredit
lhistories lin lits lpromotional lcampaigns. lSome lorganizations lmight lalso lbe ltempted lto lsell lcredit ldata lto
lother lfirms lto laid ltheir lpromotional lefforts. l However, lexcept lfor lcredit lcompanies lthemselves, lsuch lsale
loflcredit ldata lis lrestricted lby llaw land lmay lalso lraise lserious lethical lconcerns.
Personnel land lpayroll lrecords lcontain lvaluable linformation labout lemployees' lfinancial lcondition land
lpossibly labout ltheir ltastes land lhabits. lSuch linformation lmight lbe lused lto ltarget lan lorganization's lown
lemployees lin lpromotional lcampaigns. l The lrelease lof lpersonnel land lpayroll ldata lto lother lorganizations,
lexcept lto lcredit lcompanies, lis lprohibited lby lprivacy llaws.
3. External lauditors land laccountants lneed la lbasic lunderstanding lof laccounting linformation lsystems, ltheir
lcomponents, ltheir lmodes lof loperation, land ltheir lsupporting ltechnologies. lAuditors lare llikely lto lbe
linvolved lprimarily lbecause lof ltheir lexpertise lin linternal lcontrols land ltheir lknowledge lof lwhat lenhances
lorldetracts lfrom la lsystem's lauditability. lAccountants lare llikely lto lbe linvolved lprimarily lbecause lof ltheir
lexpertise lin levaluating land ldesigning la lsystem's loutputs lin lrelation lto lthe lneeds lof lthe lorganization land
litslusers.
4. Under lSection l201of lthe lSarbanes-Oxley lAct lof l2002, lauditors lare lprohibited lfrom lproviding lany lnon-
auditlservice, lincluding linformation lsystems ldesign land limplementation, lto lits laudit lclients. l (This lAct ldoes
lnot
, directly lapply lto lnon-public lcompanies.) l Accountants lcan lstill lprovide lconsulting lservices, land lthis
lwilllcontinue lto lbe la llarge lpractice-just lnot lto ltheir lown laudit lclients.
5. If laccounting lsystems lare lto ldo ltheir ljob lof lproviding lhigh lquality laccounting linformation leffectively land
lefficiently, lusers lmust lparticipate lin lsystems ldevelopment. lSome laspects lof ldevelopment lrequire
lspecialized lexpertise, lfor lexample, lin lcomputer lscience lor lauditing, lthat lusers lmay lnot lhave. lHowever,
lmany lother laspects lrelate lto lthe ltypes lof laccounting linformation lthat lare lneeded land lthe lway lin lwhich
lthatlinformation lshould lbe lpresented lto lusers. lIn lthese lareas, lusers lare lthe lexperts. l A lsystem ldeveloped
lentirely lby ltechnical lspecialists lmay lbe ltechnologically lsuperior lbut lmay lfail lto lmeet lthe lusers' lneeds.
User lparticipation lin lsystems ldevelopment ldoes lnot lnecessarily lmean lmembership lon lsystems lprojects.
lThe lrequired lparticipation lcan lbe lprovided lin lother lways, lsuch las lregular lmeetings lwith lproject lmembers.
lBut lexperience lhas lshown lthat lthe lintimacy lof lcontact lprovided lby lproject lmembership lis lthe lbest lway lto
lensure lthat lthe lusers' lpoint lof lview lis lrepresented lin ldevelopment ldecisions.
6. The lCPA llicense lis la lhighly lrespected lcertification lproviding levidence lof laccounting lcompetence land
lauthorizing lthe lholder lto lengage lin ltypes lof lpublic laccounting lpractice lregulated lby lstate llaw. lHowever,
lother lcertifications lare lmore ldirectly lrelevant lto lother ltypes lof laccounting lpractice, lsuch las lmanagement
laccounting lor linternal lauditing. lAlthough lthe lCMA land lCIA ldesignations ldo lnot lcarry lthe llegal lstatus lof
lthe lCPA llicense land lmay lnot lyet lhave lthe lsame lpublic lrecognition, lthey lare lgrowing lrapidly lin
lacceptancelin ltheir lrespective lfields. l A lstudent lwho lplans lto lpractice lin lone lof lthese lfields lis llikely lto lbe
lserved lbetterlby la lspecialized lcertification lthan lby lobtaining la lCPA llicense
7. The lpurpose lof lthis lactivity lis lto lget lstudents lto lstart lthinking labout lwhat la lbasic laccounting linformation
lsystem lis land lto linitiate la llively ldiscussion. l The linstructor lshould lallow lconsiderable lflexibility lin
lanswerslto lthis lquestion. l When lthe lstudents lare lfinished, ltell lthem lthey ljust lcreated lan l“accounting
lsystem.”
Randomly lselect lone lteam lto lpresent lits lsolution lto lthe lclass. l At lthe lappropriate ltime lin lthe
lpresentation,lthe linstructor lshould lraise lquestions lfor lany lteam lto lanswer.
What lis la ltransaction?
lWhat lis la ljournal
lentry?
How lcan lyou lensure lthat lthis ltransaction lgets lrecorded? l Recorded lonly lone ltime? l Recorded lin lthe
lcorrect ltime lperiod? l lRecorded lfor lthe lcorrect lamount?
How lcan lyou lbe lsure lan lemployee ldoes lnot lsteal lthe lski lpoles?
What lhappens lif lthe lsales lamount lis lrecorded las, le.g., l$1,500 linstead lof l$1,600? l How lcan lyou lprevent
lthis lfrom lhappening?
How lcan lwe lknow lif lthis lorder lexceeds lSnowmass’ lcredit llimit?
What linformation ldoes lthe laccounting lsystem lneed lto lprovide lso lyou lcan ldetermine:
How lprofitable lare lthe lski lpoles lare?
lShould lyou loffer lanother lproduct?
Which lsalesperson lis lgetting lthe lhighest lvolume lof lorders lfor lski lpoles?
lIs lthis lsalesperson loffering ltoo lmany lsales ldiscounts?
Which lsalesperson lis lmaking lthe lmost lprofit lon lsales?
lWhich lsalespeople lsold lwhat lski lproducts?
Which lcustomers lbought lwhich lski lproducts?
If lyou lmanufacture l(as lopposed lto lbuying lthe lfinished lgood lto lresell) lthese lski lpoles lwill lyour laccounting
lsystem lprovide lthe lfollowing?
How llong ldid lit ltake lyou lfrom lthe ltime lyou lreceived lthe lcustomer’s lorder lfor l50 lski lpoles luntil lyou
ldelivered lthem lto lthe lcustomer? l If lit ltakes ltoo llong, la lcompetitor lno ldoubt lis leager lto ltake lthe lorder.
l l l l l l l l
Constance Lehmann (Solutions Manual All Chapters, 100% Original
l l l l l l l l
Verified, A+ Grade) l l l
Chapter 1 l
Significance of Accounting Information Systems and the
l l l l l l
Accountant’s Role
l l
INTRODUCTORY lSCENARIO: lSUGGESTED lSOLUTIONS lTO lQUESTIONS
1. Employee lovertime lhours, lcustomer linformation l(e.g., lage lgroups), linventory llevels, lreorder lpoints, lEOQ
lcalculation, lvolume/quantity ldiscount lanalysis, lsquare lfootage lin luse lv. lstorage, lcustomer lflow ldata,
lspoilage
2. How lmuch lis lclient lwilling lto lpay? lSystem lthat lis leasy lfor lservers lto luse lwith lproper lcontrols. lBob’s lhourly
lrate lwould lbe la lconcern lfor lclient. lWill lBob lbe laround l“after lthe lsale” l(i.e., ltech lsupport)? lWhat ltypes lof
lpre-packaged lsystems lare lavailable?
3. Information lto lhelp lwith lsoftware ldivision l(e.g., ltotal lsales ldollars, lcomplexity lof laccounting lsystem). lHow
lmany lcomputers lneeded? lAny lexpansion lplanned? lWhat ltypes lof lemployees ldo lthey lhave l(e.g., lwaiters
lwould lwant lquick ltouch lscreens)?
4 The lowner lof lthe lrestaurant lwants la lnew laccounting lsystem lbecause lhe lneeds lup-to-date linformation lon
lhow lthe lbusiness lis ldoing. l Waiting luntil lthe lend lof lthe lyear, lor leven lthe lquarter, ldoes lnot lgive lMarshall
lthelinformation lhe lneeds lto lmake lthose lday-to-day ldecisions lthat lwill lensure lthe lsuccess lof lhis lrestaurant.
CHAPTER lVIGNETTES: lSUGGESTED lRESPONSES lTO lQUESTIONS
Vignette l1.1
1. Closer lrelationships lwith lremaining lsuppliers, lthe lability lto lcarry lless linventory l(reducing lcarrying lcosts
land lrisks lof ltheft lor lloss lof linventory), lsharing lof lplanning linformation lwith lsuppliers, leasier lto
lmonitorlvendor lperformance. lMight llose lvolume ldiscounts lif ltrying lto lminimize linventory lon lhand lby
lhaving lsmaller lshipments lfrom lvendors lshipped lmore loften.
2. Reduction lin lpaperwork, lreduction lin linput lerrors, lordering land lcash lreceipt lprocesses lmore lefficient,
lincreases lin lefficiency lin lmeeting lchanges lin ldemand. lOne ldisadvantage lwould lrelate lto lproblems
lwithlsettling ldisputed lorders lor lpayments lwith lloss lof l“paper ltrail” lthat lincludes lauthorized lsignatures.
Vignette l1.2
1. Managers lwould lprobably lfind linformation lin lunits lto lbe lmost luseful lfor lplanning ldecisions lbecause lthis
linformation lwould lrepresent lthings lover lwhich lhe/she lhas lcontrol. lWhile lthe lmanager lmight lnot lhave
lcontrol lover lsalaries, lhe/she ldoes lhave lcontrol lover lthe lamount lof lovertime land lthe lapproval lof lvacation
loflthe lemployees.
2. Managers lwould lprobably lwant linformation lrelated lto lproduction lnumbers l(to ldetermine lseasonality;
lduring lslow ltimes, lmore lemployees lcould lbe lon lvacation), lthe lnumber lof lvacation lhours lper lemployee,
lthelnumber lof lovertime lhours lper lemployee, lbackorder linformation, land linformation lto lhelp lthe lmanager
lmatch lstaffing llevels lwith lproduction.
Vignette l1.3
1. The lprivacy lof linformation lis la lmajor lconsideration, las lthe lcustomer lmight lnot lwant ltheir lspending lpattern
linformation lshared lwith lother lparties. lLoss lof lconfidential linformation lcan lbe ldisastrous lto la lcompany’s
lreputation land llead lto lsignificant lfinancial llosses l(lost lsales, lfines, letc.) lInformation labout lcustomers
lmustlbe lprotected lfrom linformation lleakage lto lother lthird lparties lwho lgain lauthorized l(or lunauthorized)
laccess
, to linformation. lAt lthe lvery lleast, lconfidential linformation labout lthe lcustomers lshould lbe lencrypted land
lhave llimited laccess.
2. Inventory lmanagement l(e.g., lturnover, lobsolescence, lsupply/demand, lreorder llevels), lpotential lmarkets lor
lproduct llines lfor lexpansion, lfrequent lbuyer lprograms.
Vignette l1.4
1. The lsituation lcould lhave lbeen lavoided lif lemployees lhad lbeen lpart lof lthe ldecision-making land ltesting
learlylin lthe lproject. lEmployee lbuy-in lis lessential lto lthe lsuccess lof lany lnew lsystem limplementation. lIt lis
lkey lthatlthe lsystem lprovide lmanagers lwith linformation lthat lthey lneed lfor ldecision-making. lIt lis lalso
limportant lto lhave la lmaintenance lcontract lin lplace, lwith lbetter lreporting lto lmanagement land lregular
lfollow-up. lIt lappears lthat lthis ldecision lwas lnot lmade lby lexecutive lmanagement, lso lits lsuccess lwas
lquestionable lsince
the l“tone lat lthe ltop” lwith lregard lto lthe lproject lwas l“ignorance”. l Since lexecutive lmanagement ldid lnot
lmonitor lthe lproject, lthey lcould lnot lrespond lto lKluger’s lcomplaints, lnor lcould lthey lprovide l“strong
encouragement” lfor lcontinuation lof lthe lproject loriginally lstarted lby lLehmann. lIn lfact, lit lappears lthat
lexecutive lmanagement lwas lnot linvolved lin lthe ldecision lto ltake lon lthe lnew lsystem. lKluger lwas lnot
lgivenlthe lopportunity lto llearn lthe lnew lsystem, lnor lwas lthere lmotivation lto llearn lthe lnew lsystem. lThe
lcompanylalso lhad linadequate lbackup lso lthat lthe lproject lcould lcontinue lin lthe labsence lof la lkey
lemployee.
2. .Here lare lsome lsuggested l“next lsteps”
• Improve lthe lgovernance lprocess land lthe l“tone lat lthe ltop” lto lget lexecutive lmanagement linvolvement land
loversight lof lsystem lprojects—this lincludes laligning lany lsystem lprojects lwith lthe lstrategy lof lthe
lcompany
• Determine lthat lany lsystem lchosen lby lmanagement lwill lprovide lquality linformation luseful lfor
ldecision-lmaking lat lall llevels
• Reinstate lthe lmaintenance lcontract land lset lup la ltraining lcontract lif lit lis ldetermined lmore lcost-effective
landlin lline lwith lthe lcompany lbusiness lplan lto luse lthe lnew lsystem
• Provide ltraining land lemployee linvolvement lin ldeveloping lthe lsystem
• Provide lbetter loversight lof lthe lcontroller lfunction
Vignette l1.5
1. The lredesign lprocess lcan lbe limproved lusing lthe lfollowing lsuggestions:
• Set lup lend-user lgroups lto lget linput lregarding loutput lneeds, ldata lcollection lneeds, lscreen, land lform llayouts
• Develop la lschedule lof ltests lto lbe lconducted lwith lrepresentative lend lusers lfor lpilot ltesting
• Allow lend luser linput lfor lchanges land limprovements lto lsystem
• Set lup ltraining lfor lall laffected lemployees
• Get lmanagement land lprogrammer lbuy-in lfor lessential lcontrols land laudit ltrails lat lthe lfront lend lof
ldevelopment
• Emphasize lthe limportance lof lcontrols, lprotection lof linformation lassets, land lprotection lof
lconfidential/private linformation
SOLUTIONS lTO lDISCUSSION lQUESTIONS lAND lPROBLEMS
1. The lproject lthat lFinkelstein land lAssociates lis lconsidering lis la lcapital linvestment lthat lrequires linformation
lon lthe lestimated linitial linvestment land lthe lestimated lfuture lreturn. l The lfuture lreturn lwould lbe lmeasured
lbylnet lincremental lcash lflows lto lthe lmall l(incremental lcash linflows lless lincremental lcash loutflows).
Estimated linitial linvestment lwould linclude:
• Architects lfees
• Renovation lof lexisting lfacilities
• Construction lof lnew lfacilities land lfood lcourt
• Cost lof ldisruption lof ltrade lduring lproject
, Estimated lnet lincremental lcash lflows lwould linclude:
Cash linflows:
• Increased lstore lrents lfrom lexisting lfacilities
• Rents lfrom lnew lfacilities land lfood lcourt
Less lcash loutflows:
• Increased ljanitorial lcosts
• Increased lsecurity lcosts
Estimates lof lthe lfuture lcash linflows land loutflows lcould lbe lbased lon lthe lmall's lhistorical laccounting
ldata.lEstimates lof lthe lrenovation land lconstruction lcosts lwould lbe lbased lprimarily lon lthe larchitect's
ljudgment land lexperience. lIt lwould lbe ldifficult lto lmake lprecise lestimates lof lthe lcost lof ltrade ldisruption,
lalthough lsome ldata lmay lbe lavailable lfrom lindustry lsources. lAdditional luseful linformation lwould
linclude ldemographic ldata lfor lthe llocal lcommunity land lestimates lof llocal leconomic lactivity land
lconsumer lbuyinglpower.
2. a. land lb.
Purchasing ldata lmight lreveal lthe ldegree lof lcompetition lamong lvendors land lvendors' lpricing lpolicies. l An
lorganization lmight ldecide lto lintegrate lvertically lby lbuying lan lequity lposition lin lkey lvendors lor lby
lproducing lsome lof lthe lneeded lgoods land lservices litself.
Perpetual linventory lrecords lindicate linventory lcarrying lcosts land lmight lreveal lbuying lpatterns lfor ldifferent
lclasses lof lgoods. lAn lorganization lmight ldecide lto ldrop lsome lproduct llines lthat lare lexpensive lto lcarry lin
linventory land lfor lwhich ldemand lis ldecreasing, lerratic, lor lhighly lseasonal.
Manufacturing lcost ldata lmight lshed llight lon lan lorganization's lability lto lcompete lin lits lmarket. lAn
lorganization lwith lunusually llow lmanufacturing lcosts, lbecause lof la lhigh ldegree lof lautomation lor lfor lother
lreasons, lwould lenjoy la ldistinct lcompetitive ladvantage.
Customer lcredit land laccounts lreceivable ldata lcontain lvaluable linformation lon lcustomers' lfinancial
lcondition. lAn lorganization lwould lwish lto ltarget lhigh-income lcustomers lor lcustomers lwith lgood lcredit
lhistories lin lits lpromotional lcampaigns. lSome lorganizations lmight lalso lbe ltempted lto lsell lcredit ldata lto
lother lfirms lto laid ltheir lpromotional lefforts. l However, lexcept lfor lcredit lcompanies lthemselves, lsuch lsale
loflcredit ldata lis lrestricted lby llaw land lmay lalso lraise lserious lethical lconcerns.
Personnel land lpayroll lrecords lcontain lvaluable linformation labout lemployees' lfinancial lcondition land
lpossibly labout ltheir ltastes land lhabits. lSuch linformation lmight lbe lused lto ltarget lan lorganization's lown
lemployees lin lpromotional lcampaigns. l The lrelease lof lpersonnel land lpayroll ldata lto lother lorganizations,
lexcept lto lcredit lcompanies, lis lprohibited lby lprivacy llaws.
3. External lauditors land laccountants lneed la lbasic lunderstanding lof laccounting linformation lsystems, ltheir
lcomponents, ltheir lmodes lof loperation, land ltheir lsupporting ltechnologies. lAuditors lare llikely lto lbe
linvolved lprimarily lbecause lof ltheir lexpertise lin linternal lcontrols land ltheir lknowledge lof lwhat lenhances
lorldetracts lfrom la lsystem's lauditability. lAccountants lare llikely lto lbe linvolved lprimarily lbecause lof ltheir
lexpertise lin levaluating land ldesigning la lsystem's loutputs lin lrelation lto lthe lneeds lof lthe lorganization land
litslusers.
4. Under lSection l201of lthe lSarbanes-Oxley lAct lof l2002, lauditors lare lprohibited lfrom lproviding lany lnon-
auditlservice, lincluding linformation lsystems ldesign land limplementation, lto lits laudit lclients. l (This lAct ldoes
lnot
, directly lapply lto lnon-public lcompanies.) l Accountants lcan lstill lprovide lconsulting lservices, land lthis
lwilllcontinue lto lbe la llarge lpractice-just lnot lto ltheir lown laudit lclients.
5. If laccounting lsystems lare lto ldo ltheir ljob lof lproviding lhigh lquality laccounting linformation leffectively land
lefficiently, lusers lmust lparticipate lin lsystems ldevelopment. lSome laspects lof ldevelopment lrequire
lspecialized lexpertise, lfor lexample, lin lcomputer lscience lor lauditing, lthat lusers lmay lnot lhave. lHowever,
lmany lother laspects lrelate lto lthe ltypes lof laccounting linformation lthat lare lneeded land lthe lway lin lwhich
lthatlinformation lshould lbe lpresented lto lusers. lIn lthese lareas, lusers lare lthe lexperts. l A lsystem ldeveloped
lentirely lby ltechnical lspecialists lmay lbe ltechnologically lsuperior lbut lmay lfail lto lmeet lthe lusers' lneeds.
User lparticipation lin lsystems ldevelopment ldoes lnot lnecessarily lmean lmembership lon lsystems lprojects.
lThe lrequired lparticipation lcan lbe lprovided lin lother lways, lsuch las lregular lmeetings lwith lproject lmembers.
lBut lexperience lhas lshown lthat lthe lintimacy lof lcontact lprovided lby lproject lmembership lis lthe lbest lway lto
lensure lthat lthe lusers' lpoint lof lview lis lrepresented lin ldevelopment ldecisions.
6. The lCPA llicense lis la lhighly lrespected lcertification lproviding levidence lof laccounting lcompetence land
lauthorizing lthe lholder lto lengage lin ltypes lof lpublic laccounting lpractice lregulated lby lstate llaw. lHowever,
lother lcertifications lare lmore ldirectly lrelevant lto lother ltypes lof laccounting lpractice, lsuch las lmanagement
laccounting lor linternal lauditing. lAlthough lthe lCMA land lCIA ldesignations ldo lnot lcarry lthe llegal lstatus lof
lthe lCPA llicense land lmay lnot lyet lhave lthe lsame lpublic lrecognition, lthey lare lgrowing lrapidly lin
lacceptancelin ltheir lrespective lfields. l A lstudent lwho lplans lto lpractice lin lone lof lthese lfields lis llikely lto lbe
lserved lbetterlby la lspecialized lcertification lthan lby lobtaining la lCPA llicense
7. The lpurpose lof lthis lactivity lis lto lget lstudents lto lstart lthinking labout lwhat la lbasic laccounting linformation
lsystem lis land lto linitiate la llively ldiscussion. l The linstructor lshould lallow lconsiderable lflexibility lin
lanswerslto lthis lquestion. l When lthe lstudents lare lfinished, ltell lthem lthey ljust lcreated lan l“accounting
lsystem.”
Randomly lselect lone lteam lto lpresent lits lsolution lto lthe lclass. l At lthe lappropriate ltime lin lthe
lpresentation,lthe linstructor lshould lraise lquestions lfor lany lteam lto lanswer.
What lis la ltransaction?
lWhat lis la ljournal
lentry?
How lcan lyou lensure lthat lthis ltransaction lgets lrecorded? l Recorded lonly lone ltime? l Recorded lin lthe
lcorrect ltime lperiod? l lRecorded lfor lthe lcorrect lamount?
How lcan lyou lbe lsure lan lemployee ldoes lnot lsteal lthe lski lpoles?
What lhappens lif lthe lsales lamount lis lrecorded las, le.g., l$1,500 linstead lof l$1,600? l How lcan lyou lprevent
lthis lfrom lhappening?
How lcan lwe lknow lif lthis lorder lexceeds lSnowmass’ lcredit llimit?
What linformation ldoes lthe laccounting lsystem lneed lto lprovide lso lyou lcan ldetermine:
How lprofitable lare lthe lski lpoles lare?
lShould lyou loffer lanother lproduct?
Which lsalesperson lis lgetting lthe lhighest lvolume lof lorders lfor lski lpoles?
lIs lthis lsalesperson loffering ltoo lmany lsales ldiscounts?
Which lsalesperson lis lmaking lthe lmost lprofit lon lsales?
lWhich lsalespeople lsold lwhat lski lproducts?
Which lcustomers lbought lwhich lski lproducts?
If lyou lmanufacture l(as lopposed lto lbuying lthe lfinished lgood lto lresell) lthese lski lpoles lwill lyour laccounting
lsystem lprovide lthe lfollowing?
How llong ldid lit ltake lyou lfrom lthe ltime lyou lreceived lthe lcustomer’s lorder lfor l50 lski lpoles luntil lyou
ldelivered lthem lto lthe lcustomer? l If lit ltakes ltoo llong, la lcompetitor lno ldoubt lis leager lto ltake lthe lorder.
