AAIS CHAPTER 1 – GELINAS SUMMARY
3 THEMES IN THE TEXTBOOK
1) Enterprise systems – integrate the business processes and information from all of an
organization’s functional areas, such as marketing and sales, cash receipts, purchasing,
human resources, production and logistics, and business reporting.
Enterprise resource planning (ERP) systems – software packages that can be used for the
core systems necessary to support enterprise systems.
2) E-Business – application of electronic networks (including the Internet) to undertake
business processes between individuals and organizations. These processes include
interaction between back-office (i.e. internal) processes, such as distribution, and front-office
(i.e. external) processes, such as those that connect an organization to its customers and
suppliers.
3) Internal control – a process – effected by an entity’s board of directors, management and
other personnel – designed to provide reasonable assurance regarding achieving objectives
in the following categories: efficiency and effectiveness of operations, reliability of reporting,
compliance with applicable laws and regulations.
E.g. control ensures that there’s not too much inventory.
Compliance with laws, e.g. the Sarbanes –Oxley Act of 2002 (SOX) dramatically changed
the daily work of financial accountants, auditors and many others as well.
Section 404 of SOX: management must identify, document and evaluate significant internal
controls. Auditors must, as part of an integrated audit of financial statements, report on the
effectiveness of the organization’s system of internal control.
Section 409 of SOX: requires disclosure to the public on a “rapid and current basis” of
material changes in an organization’s financial condition. Compliance with this section
requires the application of legal, financial and technical expertise to ensure that the
organization’s AIS are able to produce financial data in a timely and accurate manner.
Challenges and opportunities for the accountant
E.g. a major line of business for the Big Four firms has been to assist their clients in complying with
SOX Section 404. Also independent auditors are faced with deciding on the “reasonableness” of
financial statements produced from data contained in the information system. You need to provide
additional “value-added” service to your client.
The role of the accountant is extending to:
- Nonfinancial information (not measured in monetary units)
- Use of information technology to create or summarize information from databases
- Information interpretation to determine the quality and relevance of information to be used
for decision making (e.g. evaluating information for the assessment of risk).
The Assurance Services Executive Committee (ASEC) of the AICPA identifies, develops and promotes
nonaudit assurance services that can be offered by accountants. The technology-related services
include: information systems reliability (chapter 3 and 8) and electronic commerce (chapter 8).
CPA Vision Project with five core services proposed in the project that involve information
technology.
CITP: Certified Information Technology Professional – another credential to recognize CPAs who can
provide skilled advice on using IT to implement business strategy.
Components of the study of AIS
1. Technology – foundation on which AIS and business operations rest.
2. Databases – accounting cycle incl. data collection and storage.
3. Reporting – to design reports generated by IS, know what outputs are required or desirable.
3 THEMES IN THE TEXTBOOK
1) Enterprise systems – integrate the business processes and information from all of an
organization’s functional areas, such as marketing and sales, cash receipts, purchasing,
human resources, production and logistics, and business reporting.
Enterprise resource planning (ERP) systems – software packages that can be used for the
core systems necessary to support enterprise systems.
2) E-Business – application of electronic networks (including the Internet) to undertake
business processes between individuals and organizations. These processes include
interaction between back-office (i.e. internal) processes, such as distribution, and front-office
(i.e. external) processes, such as those that connect an organization to its customers and
suppliers.
3) Internal control – a process – effected by an entity’s board of directors, management and
other personnel – designed to provide reasonable assurance regarding achieving objectives
in the following categories: efficiency and effectiveness of operations, reliability of reporting,
compliance with applicable laws and regulations.
E.g. control ensures that there’s not too much inventory.
Compliance with laws, e.g. the Sarbanes –Oxley Act of 2002 (SOX) dramatically changed
the daily work of financial accountants, auditors and many others as well.
Section 404 of SOX: management must identify, document and evaluate significant internal
controls. Auditors must, as part of an integrated audit of financial statements, report on the
effectiveness of the organization’s system of internal control.
Section 409 of SOX: requires disclosure to the public on a “rapid and current basis” of
material changes in an organization’s financial condition. Compliance with this section
requires the application of legal, financial and technical expertise to ensure that the
organization’s AIS are able to produce financial data in a timely and accurate manner.
Challenges and opportunities for the accountant
E.g. a major line of business for the Big Four firms has been to assist their clients in complying with
SOX Section 404. Also independent auditors are faced with deciding on the “reasonableness” of
financial statements produced from data contained in the information system. You need to provide
additional “value-added” service to your client.
The role of the accountant is extending to:
- Nonfinancial information (not measured in monetary units)
- Use of information technology to create or summarize information from databases
- Information interpretation to determine the quality and relevance of information to be used
for decision making (e.g. evaluating information for the assessment of risk).
The Assurance Services Executive Committee (ASEC) of the AICPA identifies, develops and promotes
nonaudit assurance services that can be offered by accountants. The technology-related services
include: information systems reliability (chapter 3 and 8) and electronic commerce (chapter 8).
CPA Vision Project with five core services proposed in the project that involve information
technology.
CITP: Certified Information Technology Professional – another credential to recognize CPAs who can
provide skilled advice on using IT to implement business strategy.
Components of the study of AIS
1. Technology – foundation on which AIS and business operations rest.
2. Databases – accounting cycle incl. data collection and storage.
3. Reporting – to design reports generated by IS, know what outputs are required or desirable.
