Transcript Presentation Outline - Lanzhou University of Technology

Part Three
The structure of
accounting information
system 、the internal
control and system
management principle
Content abstract
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The Users of Accounting Information
Information Systems
Transaction Processing Cycles
The Internal Control Process
Organization Interaction with Information
Systems
The Development of Systems
4.1 The Users of Accounting
Information
A. External Users of Accounting Information
B. Internal Users of Accounting Information
C. Mandatory vs. Discretionary Information
A. External Users of Accounting
Information
Creditors
Investors
Stockholders
Customers and Vendors
Government Agencies
B. Internal Users of Accounting Information
Characteristi
c of
Information
Source
Level of
Aggregation
Time Horizon
Required
Accuracy
Lower Level
Managers
Middle
Managers
Top-Level
Managers
Operational
Control
Management
Control
Strategic
Planning
Largely
internal
External
Detailed
Historical
Aggregate
Future
High
Low
C. Mandatory vs. Discretionary Information
Mandatory
Information
Certain types of
information must be
generated
regardless of the
cost:
Government reports
Payroll
Basic bookkeeping
Evaluation Criteria
For mandatory
information, the
primary concern is
minimization of cost.
 In contrast,
discretionary
information should
provide greater
benefits than the cost
of generating it.
4.2 Information Systems
The term information system suggests the use of
computer technology in an organization
Information
System
Information for
Decision Making
Hardware
Data
Software
A.
B.
C.
D.
E.
F.
Electronic Data Processing (EDP) or Data Processing (DP)
Management Information Systems (MIS)
Decision Support Systems (DSS)
Expert Systems (ES)
Executive Information Systems (EIS)
Accounting Information Systems (AIS)
A. Electronic Data Processing (EDP) or
Data Processing (DP)
Use of computer technology to perform an organization’s
transaction-oriented data processing.
DP systems serve routine, recurring, general information
needs.
B. Management Information Systems
(MIS)
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Use of computer technology to provide managers with decisionoriented information beyond what a normal DP system provides.
Subsystems include:
Marketing information system
Manufacturing information system
Human resource information system
Financial information system
Functional MIS subsystems provide a logical rather than
physical way of implementing the MIS concept in
organizations.
C. Decision Support Systems (DSS)
Processes data into a decision making format for end users.
Decision support systems (DSS’s) process nonroutine
information requests on an ad hoc basis. Requires the use
of decision models and specialized databases beyond
what is in a DP system.
D. Expert Systems (ES)
Emulates an experts decision making process to
provide a decision. Different from DSS which
only provides information for making a decision.
Two components of the ES are as follows:
Knowledge base – special knowledge that an
expert possesses in the decision area.
Inference engine – process by which expert
makes the decision.
E. Executive Information System (EIS)
 Executive information systems tailor information to the
strategic needs of top-level management.
 Much of the information used by top-level management
comes from sources outside the organizations
information system. (i.e., meetings, memos, television,
periodicals, and social activities).
F. Accounting Information Systems (AIS)
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A computer-based system designed to transform
accounting data into information.
Can also include transactions processing cycles, the use of
information technology, and the development of information
systems.
4.3 Transaction Processing Cycles
The transaction processing cycles provide a means
of viewing the activities of a business.
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Revenue Cycle
Expenditure Cycle
Production Cycle
Finance Cycle
Financial Reporting Cycle
A. Revenue Cycle
Events related to the distribution of goods and services to
other entities and the collection of related payments
B. Expenditure Cycle
Events related to the
acquisition of goods
and services from
other entities and the
settlement of related
obligations.
C. Production Cycle
Events related to the
transformation of
resources into goods and
services.
D. Finance Cycle
Events related to the
acquisition and
management of capital
funds, including cash. The
treasurer is responsible for
the finances of the
business.
E. Financial Reporting Cycle
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Not an operating cycle
This cycle obtains accounting and operating data from
other cycles and processes this data so that financial
reports can be prepared.
A controller is in charge of the accounting function.
.
4.4 The Internal Control Process
Since management is far removed from the scene of
operations in a large organization, personal supervision of
employees is often replaced with various control techniques
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Definition of Internal Control
The Five Elements of the Internal Control Process
Segregation of Accounting Functions
The Internal Audit Function
A. Definition of Internal Control
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Internal control is a process designed to provide
reasonable assurance regarding the achievement of
objectives relating to:
Reliability of financial reporting
Effectiveness and efficiency of operations
Compliance with applicable laws and regulations
The concept of internal control structure is based on two major
premises: management’s responsibility and reasonable assurance.
B. Five Elements of the Internal Control
Process
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Control environment – Overall values and
integrity of organization.
Risk assessment – Identification and evaluation
of risks (Potential loss x Probability = Exposure).
Control activities – Activities undertaken to
reduce probability of loss due to significant risks.
Information and communication –
Communicating information about the control
environment and control activities.
Monitoring – Keeping watch over and changing
internal controls so that they function effectively
and efficiently.
C. Segregation of Accounting Functions
Segregate the following duties:
 Authorization
 Record keeping
 Custody of assets
D. Internal Audit Function
Internal auditing is an
independent appraisal
function charged with
monitoring and assessing
compliance with
organizational policies and
procedures.
4.5 Organization Interaction With
Information Systems
A. The Steering Committee
B. End-User Computing
C. Quick-Response Technology
A. The Steering Committee
A committee advising the Chief Information Officer that is
composed of high-level members of user functions such as
manufacturing and marketing. The committee provides a
means by which managers from other areas can influence
the information services process.
B. End-User Computing (EUC)
Functional end users do their own information processing
activities through an EUC application such as a database
that uses a query language feature to generate specific
information needed by the end user to make decisions.
C. Quick-Response Technology
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Just-In-Time
Web Commerce
Electronic Data Interchange
Extensible Business Reporting Language
Computer Integrated Manufacturing
Electronic Payment Systems
Just-in-Time
Purchase orders for inventory items are made on a
“demand-pull” basis rather than a fixed interval “push”
basis to restock store inventory levels. Adds flexibility to
meet customer needs and reduces product rework.
Web Commerce
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Provides worldwide availability of products on a single
computer.
Specially trained CPAs offer the Web Trust seal to sites
that meet certain security and privacy criteria.
Electronic Data Interchange
Electronic data interchange (EDI) is the direct
computer- to-computer exchange of business
documents via a communications network. EDI differs
from e-mail in that EDI messages are created and
interpreted by computers without human intervention.
Also makes use of universal product code (UPC) bar
code.
Extensible Business Reporting
Language
Extensible Business Reporting Language (XBRL) is a
language that facilitates the exchange over the Internet
of all kinds of business documents and financial
statements. The SEC permits companies to file their
financial reports electronically using XBRL format.
Computer-Integrated Manufacturing
(CIM)
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Components of CIM typically include computer-aided
design (CAD) workstations, real-time production monitoring
and control systems, and order inventory and control
systems.
Makes use of scanner technology and machine-readable
bar codes.
Electronic Payment Systems
Electronic funds transfer (EFT) systems are electronic
payment systems in which processing and
communication are primarily or totally electronic.
4.4 The Development of Systems
A. Blueprinting
B. Systems Development
C. Behavioral Considerations
A. Blueprinting
The company uses generic
or industry standard stock
blueprints rather than
designing its own system.
B. Systems Development
A systems development project ordinarily consists of three phases:
systems analysis, systems design, systems implementation. The
procedure attempts of improve information quality, internal control,
and minimize cost. The systems approach consists of six steps:
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Statement of system objective(s)
Creation of alternatives
Systems analysis
Systems design
Systems implementation
Systems evaluation
The Result of Poor
Systems
Development
C. Behavioral Considerations
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The users of systems should be included throughout the
steps of systems development.
Users provide valuable input into what is needed and must
accept the system that is developed.
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