Core Concepts of Accounting Information Systems, 14th Edition, by Simkin, Worrell and Savage
Chapter 1
ACCOUNTING INFORMATION SYSTEMS AND THE ACCOUNTANT
Discussion Questions
1-1. The answer to this question will vary with each university’s location. However, it is
likely most students will reveal that their parents are employed in non-manufacturing jobs.
Instructors may wish to emphasize that the large numbers of service sector employees and
knowledge workers reflect a trend.
1-2. This question encourages students to think about some of the information reporting
limitations imposed by the traditional accounting general ledger architecture. Other business
activities (or business events) that do not require journal entries include (1) obtaining a line of
M
credit, (2) issuing purchase requisitions or purchase orders, (3) signing contracts, (4) hiring a
new executive, and (5) sending financial information to investors or bank loan personnel.
Instructors may wish to point out that important information about a company’s business
activities may be included in an annual report outside the financial statements. The management
E
letters and footnotes in annual reports may reveal much about a company’s future prospects.
Managers have access to much more information than what is published in financial reports.
D
Whether or not they would like to have access to more non-financial information, or if they
would prefer that the accounting information system capture data about business events rather
than accounting transactions, is debatable. It may also be a function of the accounting system in
G
a particular company. Investors may wish to have more information available to them but the
downside is that too much information can be just as problematic as too little information.
1-3. The financial accounting systems we have known for more than 500 years are
E
changing dramatically as a result of advances in information technology and financial accounting
software. For example, databases allow accountants to collect and store all the data (accounting
transaction data and non-financial data) about a business activity or event in one system,
E
allowing those needing such information to retrieve it quickly, efficiently, and specifically in any
format they wish. Financial data can also be more easily linked to nonfinancial data because of
database technology. Thus, it is likely that financial reporting will undergo tremendous change
K
in the next few years as we learn to use technology, including artificial intelligence, more
effectively in the design of AISs.
ERP systems are another example of the information age's impact on financial accounting. Now,
organizations capture more financial and non-financial data and produce more information than
ever before. This allows companies to integrate their information systems, better forecast
everything from raw materials requirements to finished product production, and to perform more
sophisticated analyses of important business functions. For instance, sales can be examined at
many different levels and organized according to criteria such as geography, customer, product,
or salesperson.
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, Core Concepts of Accounting Information Systems, 14th Edition, by Simkin, Worrell and Savage
One of the most important changes in AISs is the way these systems will gather financial
information in the future. Although many of these systems will continue to capture data in
traditional batch mode or at POS sites, we expect newer systems to collect more of it on mobile
devices—for example, cell phones, PDAs, and digital cameras. Because more employees and
working at home these days, “digital commuting” may be another trend.
1-4. The objective of a company’s financial statements is to communicate relevant
financial information to such external parties as stockholders, investors, and government
agencies. Issuing financial statements in XBRL formats contributes to this objective by making
such financial data more searchable, comparable, informative, and therefore useful. Also,
because XBRL enables companies to use standard tags to identify specific accounting values, the
language itself imposes a greater degree of standardization in the informational content of the
reports. Finally, XBRL helps government agencies gather financial data that are more
consistent, easier to understand, self-checking, and more quickly communicated. Chapter 2
contains more about XBRL, including the idea that the language also enables its users to verify
M
accounting relationships as assets = liabilities + stockholder equity.
1-5. The questions asked here about suspicious activity reporting (SAR) require opinions
E
from students. Regarding the first question, which asks if SAR activity should be a legal matter,
there is little room for disagreement because so much of SAR is mandated by federal legislation
such as the Annunzio-Wylie Anti-Money Laundering Act of 1992, the Bank Secrecy Act of
1996, and the Patriot Act of 2001. Although there are statistics on the number of SAR filings,
D
less is known about how much of what appears to be suspicious are in fact violations of federal
statutes.
G
1-6. The example given in the question demonstrates one way in which computerization
has refined cost estimation and thus has impacted managerial accounting. However, IT has
impacted almost every area of managerial accounting (and decision making). Consider, for
E
example, the emergence of such concepts as just-in-time systems, computer integrated
manufacturing systems, manufacturing resource planning systems, target costing, and activity
based costing – all of these require IT to support managerial decision making. Forecasting and
E
budgeting are other areas of managerial accounting impacted by advances in technology, as are
the many applications of spreadsheet software, decision support systems, and expert systems.
Universities are also impacted by the many advances in IT. You might have students type
K
“university use of scorecards” in their favorite browser to discover the many uses this tool offers
to administrators in an academic environment. The search results show a variety of uses at such
universities as The Ohio State University, CSU-Stanislaus, Clemson University, Colorado State
University, San Jose State University, and others. For example, the University of Denver
adapted a version of the Balanced Scorecard to evaluate their Student Life Assessment Plan
(SLAP), which focuses on Learning Outcomes. San Jose State University uses a Scorecard to
evaluate and continuously improve their online programs.
1-7. The AICPA website lists hundreds of potential assurance services for CPAs to offer.
These include Trust Services and Information Integrity, Guidance on Audit Data Analytics,
XBRL Assurance Services, and Systems and Organization Controls for Cybersecurity,
SM 1.2
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, Core Concepts of Accounting Information Systems, 14th Edition, by Simkin, Worrell and Savage
Outsourced Services and Vendor Supply Chains. Several of the assurance services are in the
information technology management/security category. Classroom discussion might address the
particular skills that CPAs would need for each of the proposed assurance service areas.
Skepticism and integrity, for example, are two characteristics typically associated with public
accountants.
It is interesting to learn which of the existing or proposed assurance services recommended by
the AICPA will actually be offered by a given public accounting organization. Many of the
larger firms already offer at least some of these services, and the largest accounting firms today
derive a large portion of their revenues from professional services other than auditing and tax
consulting. But the industry shake-up in 2002 may also prompt some accounting firms to scale
back services and focus more on their auditing business.
1-8. This question asks students to interview auditors from professional service firms and
asks them whether or not the firms offer any assurance services. Hopefully, several firms do
M
offer such services and instructors can use this as point of departure for additional discussion
about such work.
E
1-9. Almost every traditional accounting job today requires at least some information
systems skills. In addition, there are many job opportunities that require combined skills in both
accounting and information systems. Consulting is one key area. Consultants with these skill
sets can work at helping companies choose and install accounting software. They can also help
D
companies with reviews of their business processes. Evaluating information systems security is
another area of consulting where accounting and information systems skills are valuable. Tax
planning, preparation, and consulting are yet other areas.
G
Prior research suggests that it is easier to train an accountant in information systems than vice
versa. Whether this is true or not, it is certainly clear that accounting students with information
E
systems skills are valuable employees. Individuals who are technically skilled at computers but
lack knowledge about accounting concepts are handicapped when trying to help a company to
develop and enhance its information systems. Their lack of accounting skills may lead their
E
employer to install information systems that fail to meet their needs.
1-10. Employers of both accounting and IS personnel often rank “analytical reasoning” and
“writing” skills on the same priority as technical skills, and some rank them even higher. Said
K
one recruiter at the school of one author: “I can train new employees to use our computer
systems and perform the majority of the technical tasks we will require of them. What I cannot
train them to do is to think analytically or logically. And what I refuse to do is to teach them to
speak and write clearly and effectively—skills they should have learned in high school.”
Another recruiter said it slightly differently: “Give me a technically-competent accounting or IS
student who can perform AIS tasks well, and I will pay them X dollars. Give me a student who
can explain to my clients how our services can solve their business problems and I will pay them
2X dollars.”
There are several other attributes beyond “analytical thinking” and “writing” skills that many
employers also value highly. One of them is “teamwork”—i.e., the ease and willingness of an
SM 1.3
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, Core Concepts of Accounting Information Systems, 14th Edition, by Simkin, Worrell and Savage
employee to work with others instead of working alone. Another is “dedication”—i.e., the
willingness and desire to get a given job done even if this means working more than 40 hours a
week. A third is meticulousness—the attention to detail and the desire to get all the details
correct. Finally, there is “selflessness”—the willingness to sacrifice personal goals, ego, and
time in order to finish important organizational and professional projects.
1-11. This is a growing field of career opportunities for accounting majors that should not
be underestimated! An article in the Wall Street Journal (January 12, 2014; D4), "Skill Sets You
Might Want to Sharpen This Year", included the following: Computer, Communication, Foreign
Language, Data, and Networking. The data section suggests that understanding data has become
an increasingly important part of success, that everyone should understand how "big data" or
data analysis applies to your career field.
A July 2012 White Paper by IT@Intel (Mining Big Data in the Enterprise for Better Business
Intelligence, by Fania and Miller), notes that one of the biggest challenges in big data is
M
addressing the lack of skilled experts and that the US could face a shortage of 140K to 190K of
people with deep analytical skills, and perhaps 1.5 million managers and analysts who do not
have the knowledge to use big data to make effective decisions. Accounting majors who take IT,
E
statistics, and business analytics courses should be able to take advantage of these shortages by
applying their skills and abilities in this area.
Predictive Analytics jobs are available literally anywhere in the US from NYC to Columbus, OH
D
to Seattle, WA – and many international opportunities. The organizations include Walmart,
Bank of America, healthcare firms, universities, insurance companies and the Big-4 public
accounting firms. For more information: http://predictiveanalyticsjobs.org.
G
Another interesting web site https://www.icrunchdata.com/jobs/. This site identifies the many
different types of jobs that are available, such as client service and sales analyst, quantitative
E
analyst, risk analyst, etc.
Degrees/courses to prepare for these types of jobs are usually called an MS in Analytics or
E
Business Analytics. (http://analytics.ncsu.edu/?page_id=4184). At this site, you can click on any
university program to view the structure and content of the degree program. As you can see, this
is a lucrative new field for accounting majors to consider. The duration of the programs is as
few as 9 months, but most are 12 months or more. The curriculum is a careful mix of applied
K
mathematics, statistics, computer science, and business disciplines.
For salary information, this site is very helpful: http://analytics.ncsu.edu/?page_id=248
Depending on the decision to be made, the employee who can analyze and make business
decisions based on big data is in a position to help the firm realize a competitive advantage. This
is a skill that is a critical shortage and sure to impress even the most discriminating supervisor.
Problems
1-12.
SM 1.4
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Chapter 1
ACCOUNTING INFORMATION SYSTEMS AND THE ACCOUNTANT
Discussion Questions
1-1. The answer to this question will vary with each university’s location. However, it is
likely most students will reveal that their parents are employed in non-manufacturing jobs.
Instructors may wish to emphasize that the large numbers of service sector employees and
knowledge workers reflect a trend.
1-2. This question encourages students to think about some of the information reporting
limitations imposed by the traditional accounting general ledger architecture. Other business
activities (or business events) that do not require journal entries include (1) obtaining a line of
M
credit, (2) issuing purchase requisitions or purchase orders, (3) signing contracts, (4) hiring a
new executive, and (5) sending financial information to investors or bank loan personnel.
Instructors may wish to point out that important information about a company’s business
activities may be included in an annual report outside the financial statements. The management
E
letters and footnotes in annual reports may reveal much about a company’s future prospects.
Managers have access to much more information than what is published in financial reports.
D
Whether or not they would like to have access to more non-financial information, or if they
would prefer that the accounting information system capture data about business events rather
than accounting transactions, is debatable. It may also be a function of the accounting system in
G
a particular company. Investors may wish to have more information available to them but the
downside is that too much information can be just as problematic as too little information.
1-3. The financial accounting systems we have known for more than 500 years are
E
changing dramatically as a result of advances in information technology and financial accounting
software. For example, databases allow accountants to collect and store all the data (accounting
transaction data and non-financial data) about a business activity or event in one system,
E
allowing those needing such information to retrieve it quickly, efficiently, and specifically in any
format they wish. Financial data can also be more easily linked to nonfinancial data because of
database technology. Thus, it is likely that financial reporting will undergo tremendous change
K
in the next few years as we learn to use technology, including artificial intelligence, more
effectively in the design of AISs.
ERP systems are another example of the information age's impact on financial accounting. Now,
organizations capture more financial and non-financial data and produce more information than
ever before. This allows companies to integrate their information systems, better forecast
everything from raw materials requirements to finished product production, and to perform more
sophisticated analyses of important business functions. For instance, sales can be examined at
many different levels and organized according to criteria such as geography, customer, product,
or salesperson.
SM 1.1
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, Core Concepts of Accounting Information Systems, 14th Edition, by Simkin, Worrell and Savage
One of the most important changes in AISs is the way these systems will gather financial
information in the future. Although many of these systems will continue to capture data in
traditional batch mode or at POS sites, we expect newer systems to collect more of it on mobile
devices—for example, cell phones, PDAs, and digital cameras. Because more employees and
working at home these days, “digital commuting” may be another trend.
1-4. The objective of a company’s financial statements is to communicate relevant
financial information to such external parties as stockholders, investors, and government
agencies. Issuing financial statements in XBRL formats contributes to this objective by making
such financial data more searchable, comparable, informative, and therefore useful. Also,
because XBRL enables companies to use standard tags to identify specific accounting values, the
language itself imposes a greater degree of standardization in the informational content of the
reports. Finally, XBRL helps government agencies gather financial data that are more
consistent, easier to understand, self-checking, and more quickly communicated. Chapter 2
contains more about XBRL, including the idea that the language also enables its users to verify
M
accounting relationships as assets = liabilities + stockholder equity.
1-5. The questions asked here about suspicious activity reporting (SAR) require opinions
E
from students. Regarding the first question, which asks if SAR activity should be a legal matter,
there is little room for disagreement because so much of SAR is mandated by federal legislation
such as the Annunzio-Wylie Anti-Money Laundering Act of 1992, the Bank Secrecy Act of
1996, and the Patriot Act of 2001. Although there are statistics on the number of SAR filings,
D
less is known about how much of what appears to be suspicious are in fact violations of federal
statutes.
G
1-6. The example given in the question demonstrates one way in which computerization
has refined cost estimation and thus has impacted managerial accounting. However, IT has
impacted almost every area of managerial accounting (and decision making). Consider, for
E
example, the emergence of such concepts as just-in-time systems, computer integrated
manufacturing systems, manufacturing resource planning systems, target costing, and activity
based costing – all of these require IT to support managerial decision making. Forecasting and
E
budgeting are other areas of managerial accounting impacted by advances in technology, as are
the many applications of spreadsheet software, decision support systems, and expert systems.
Universities are also impacted by the many advances in IT. You might have students type
K
“university use of scorecards” in their favorite browser to discover the many uses this tool offers
to administrators in an academic environment. The search results show a variety of uses at such
universities as The Ohio State University, CSU-Stanislaus, Clemson University, Colorado State
University, San Jose State University, and others. For example, the University of Denver
adapted a version of the Balanced Scorecard to evaluate their Student Life Assessment Plan
(SLAP), which focuses on Learning Outcomes. San Jose State University uses a Scorecard to
evaluate and continuously improve their online programs.
1-7. The AICPA website lists hundreds of potential assurance services for CPAs to offer.
These include Trust Services and Information Integrity, Guidance on Audit Data Analytics,
XBRL Assurance Services, and Systems and Organization Controls for Cybersecurity,
SM 1.2
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Distribution of this document is illegal extra per year?
, Core Concepts of Accounting Information Systems, 14th Edition, by Simkin, Worrell and Savage
Outsourced Services and Vendor Supply Chains. Several of the assurance services are in the
information technology management/security category. Classroom discussion might address the
particular skills that CPAs would need for each of the proposed assurance service areas.
Skepticism and integrity, for example, are two characteristics typically associated with public
accountants.
It is interesting to learn which of the existing or proposed assurance services recommended by
the AICPA will actually be offered by a given public accounting organization. Many of the
larger firms already offer at least some of these services, and the largest accounting firms today
derive a large portion of their revenues from professional services other than auditing and tax
consulting. But the industry shake-up in 2002 may also prompt some accounting firms to scale
back services and focus more on their auditing business.
1-8. This question asks students to interview auditors from professional service firms and
asks them whether or not the firms offer any assurance services. Hopefully, several firms do
M
offer such services and instructors can use this as point of departure for additional discussion
about such work.
E
1-9. Almost every traditional accounting job today requires at least some information
systems skills. In addition, there are many job opportunities that require combined skills in both
accounting and information systems. Consulting is one key area. Consultants with these skill
sets can work at helping companies choose and install accounting software. They can also help
D
companies with reviews of their business processes. Evaluating information systems security is
another area of consulting where accounting and information systems skills are valuable. Tax
planning, preparation, and consulting are yet other areas.
G
Prior research suggests that it is easier to train an accountant in information systems than vice
versa. Whether this is true or not, it is certainly clear that accounting students with information
E
systems skills are valuable employees. Individuals who are technically skilled at computers but
lack knowledge about accounting concepts are handicapped when trying to help a company to
develop and enhance its information systems. Their lack of accounting skills may lead their
E
employer to install information systems that fail to meet their needs.
1-10. Employers of both accounting and IS personnel often rank “analytical reasoning” and
“writing” skills on the same priority as technical skills, and some rank them even higher. Said
K
one recruiter at the school of one author: “I can train new employees to use our computer
systems and perform the majority of the technical tasks we will require of them. What I cannot
train them to do is to think analytically or logically. And what I refuse to do is to teach them to
speak and write clearly and effectively—skills they should have learned in high school.”
Another recruiter said it slightly differently: “Give me a technically-competent accounting or IS
student who can perform AIS tasks well, and I will pay them X dollars. Give me a student who
can explain to my clients how our services can solve their business problems and I will pay them
2X dollars.”
There are several other attributes beyond “analytical thinking” and “writing” skills that many
employers also value highly. One of them is “teamwork”—i.e., the ease and willingness of an
SM 1.3
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, Core Concepts of Accounting Information Systems, 14th Edition, by Simkin, Worrell and Savage
employee to work with others instead of working alone. Another is “dedication”—i.e., the
willingness and desire to get a given job done even if this means working more than 40 hours a
week. A third is meticulousness—the attention to detail and the desire to get all the details
correct. Finally, there is “selflessness”—the willingness to sacrifice personal goals, ego, and
time in order to finish important organizational and professional projects.
1-11. This is a growing field of career opportunities for accounting majors that should not
be underestimated! An article in the Wall Street Journal (January 12, 2014; D4), "Skill Sets You
Might Want to Sharpen This Year", included the following: Computer, Communication, Foreign
Language, Data, and Networking. The data section suggests that understanding data has become
an increasingly important part of success, that everyone should understand how "big data" or
data analysis applies to your career field.
A July 2012 White Paper by IT@Intel (Mining Big Data in the Enterprise for Better Business
Intelligence, by Fania and Miller), notes that one of the biggest challenges in big data is
M
addressing the lack of skilled experts and that the US could face a shortage of 140K to 190K of
people with deep analytical skills, and perhaps 1.5 million managers and analysts who do not
have the knowledge to use big data to make effective decisions. Accounting majors who take IT,
E
statistics, and business analytics courses should be able to take advantage of these shortages by
applying their skills and abilities in this area.
Predictive Analytics jobs are available literally anywhere in the US from NYC to Columbus, OH
D
to Seattle, WA – and many international opportunities. The organizations include Walmart,
Bank of America, healthcare firms, universities, insurance companies and the Big-4 public
accounting firms. For more information: http://predictiveanalyticsjobs.org.
G
Another interesting web site https://www.icrunchdata.com/jobs/. This site identifies the many
different types of jobs that are available, such as client service and sales analyst, quantitative
E
analyst, risk analyst, etc.
Degrees/courses to prepare for these types of jobs are usually called an MS in Analytics or
E
Business Analytics. (http://analytics.ncsu.edu/?page_id=4184). At this site, you can click on any
university program to view the structure and content of the degree program. As you can see, this
is a lucrative new field for accounting majors to consider. The duration of the programs is as
few as 9 months, but most are 12 months or more. The curriculum is a careful mix of applied
K
mathematics, statistics, computer science, and business disciplines.
For salary information, this site is very helpful: http://analytics.ncsu.edu/?page_id=248
Depending on the decision to be made, the employee who can analyze and make business
decisions based on big data is in a position to help the firm realize a competitive advantage. This
is a skill that is a critical shortage and sure to impress even the most discriminating supervisor.
Problems
1-12.
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