INFS7004 Accounting Information Systems

Lecture 1 (1) Introduction; and (2) Course Overview

(1) Introduction Welcome

Welcome to INF7004 Accounting Information Systems. My name is Dr. Steven (Steve) Fraser. I am the course coordinator. Any questions about the

course should be addressed to me. I am also your lecturer and your tutor. I have taught AIS subjects at The University of Melbourne since about 1994, now at ANU teaching accounting and IS courses (including AIS) since 2003.

Course Aims
Business systems form an integral part of the operation

of the modern business organisations. This course takes a close look at the way these systems are structured in organisations, typically enterprise-wide systems such as SAP ERP systems, to ensure that they are able to successfully collect and process information relating to their core transactions. To this end, this course focuses on the main transaction cycles and business processes, the technologies required for these activities, as well as the internal controls required to regulate their operation. Students will gain a detailed understanding of these transaction cycles and business processes by focusing on theory as well as engaging in practice.
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Course Aims
This course also considers some recent developments

such as new message protocols like XML and XBRL used in electronic commerce that are particularly important to users of financial accounting information such as analysts and investors.

Course Aims, cont

AIS should be of interest to accounting and information

systems students because this course broadens students understanding of how organisations operate and the information systems and internal controls required to support them. Moreover, this course provides students with an understanding of the business processes (particularly accounting processes) adopted by organisations to capture and process their core transactions. This course provides the following pedagogical benefits for students studying accounting, information systems and information technology:
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Course Aims, cont .

IS and IT students: AIS provides an understanding of

business processes that underpin transaction processing systems (TPSs) that are often integral to enterprise-wide systems such as ERP systems like SAP AG; the typical database structure found in these systems; and the internal controls used by organisations to ensure these TPSs are effective. Accounting students: AIS provides an understanding of the role that information systems play in the evolution of accounting processes from the traditional Pachioli manual processes to the more automated processes based on the Resources-Events-Agents (REA) model designed to operate with computer-based information technology. Financial accounting students: AIS provides an understanding of the role of information systems for the communication of financial accounting information systems using the XBRL protocol.

Course Aims, cont .

Management accounting students: AIS provides a detailed

understanding of the way accounting information is derived in organisations by linking students understanding of specific accounting information, such as manufacturing variances, with the approach organisations typically use to collect the data to calculate this accounting information. Auditing students: AIS provides these students with an overview of accounting systems processes and an understanding of the threats to these processes which typically operate in a computer-based environment, and the internal controls needed to minimise their exposure.

Objectives
Students who successfully complete this subject should

have the knowledge and skills to:

describe how and why organisations adopt information technology based on their understanding of the role of computer-based accounting systems, and the business processes that support these systems. design an AIS database based on an understanding of the concept of business exchange and how they map into the REA framework prepare and understand appropriate documentation that describes the business oriented processes underpinning the exchange process in organisations analyse the internal controls in organisations based on their understanding of the importance of organisational controls in the 8 operation of enterprise systems such as SAP AG ERP systems.

Objectives

describe the use of XBRL in organisations based on their understanding of the use of XBRL in commerce. describe the accounting processes in ERP systems based on their understanding of how the basic accounting processes are implemented in the SAP AG system. show competence in giving oral presentations.

Prerequisites or Assumed Knowledge

This is a Masters level course. It is assumed that you will have some information

systems and/or accounting experience or have/are taking appropriate courses.

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Textbooks
Hall, J., (2008), Accounting Information Systems, 6th

Edition, Thomson, South-Western, NJ The Calvert SAP Work-Book will be available later in semester

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Lectures
Each week the lecture session will include a two-hour

lecture outlining the major issues pertaining to each weeks theme. This lecture will provide an overview only, and you are required to supplement this lecture with reading from the text and other sources. Lectures are held in one two hour session per week on Wednesdays: 2pm to 4pm, ARNDT LT2 (Building 25)

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Tutorials
Every student is required to attend the tutorial. The tutorial will be held on Wednesdays: 1pm to 2pm,

ARNDT LT2 (Building 25). Tutorials start in week 2. Please note that attendance at tutorials will be recorded because it is an important component of the assessment in this unit.

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Assessment
Task Tutorial participation and presentation Tutorial exercises (5 x 1marks) Assignment: Review of the basic accounting processes in SAP AG Weighting 5% 5% 20%

Final Examination (Closed Book, 3 hour) TOTAL

70% 100%

All components of the above assessment are compulsory and must be submitted. Also, you must achieve at least 50% for the final examination component to be eligible for an automatic pass grade in this course.

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Assignments
The assignment is worth 20% of the marks of the course, and should be submitted by 4pm, Friday, 16th October, 2009. This work is to be done in pairs. You may want to split the work to reduce individual work-loads. Please note that you will be able to complete this assignment in the computer lab in Copland G025, with academic support at specified times, or you can download a copy of the GUI from the course web-site with instructions to enable you to access the SAP system from your home computer.
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Assignments
The aim of this assignment is to work through the four

(4) SAP accounting modules in the Calvert Workbook which constitute the main accounting system, and based on your experience, to provide an analysis of this SAP accounting system. The nature of this analysis will be made clear in lectures. The four SAP accounting modules are:

module 1: Introduction to SAP module 2: General Ledger module 3: Accounts Payable and the Procurement process module 4: Accounts Receivable and the Sales Order process
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Assignments
Required: Work through the four SAP Accounting

modules specified above and provide a critique of the SAP system based on this work. This critique should include documentation of the SAP revenue and expenditure cycles you encountered, which should include, as a minimum, document/systems flowcharts. (You would be well advised to use the Gelinas Ch. 3 approach to ensure your documentation is of high quality.) Your critique should also focus on the SAP controls; ease of use; and the nature of the SAP functionality and its scope. Your critique can also focus more broadly on the SAP system but should NOT be too general (do not include material on ERP systems in general unless it 17 applies to the SAP system).

Assignments
What outcomes should we expect from this assignment?

These requirements aim to merge the revenue and expenditure cycles that you learn early in the course, with the SAP programs you encountered as you worked through Cheryl Calverts workbook. (The real learning from working through the Calvert workbook takes place during the systems documentation activity AFTER working through the 4 modules, by you reflecting on how the SAP programs link together as part of the accounting cycles.) This should provide you with a framework (your mental model) for understanding the links between these programs. You will be able to use this framework to give you with a better understanding of how the SAP system handles 18 the Accounts Payable and the Procurement Process and Accounts Receivable and the Sales Order Process.

Assignments
You will, for instance, from your work on the accounting

cycles know which departments are likely to use the different SAP screens and the controls that should be in place in these cycles.

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Lecture Timetable
See course outline http://cbe.anu.edu.au/courses/outline/INFS7004.pdf

ANY QUESTIONS?

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(2) Course Overview - Objectives

Primary information flows within the business

environment Accounting information systems and management information systems The general model for information systems Financial transactions from non-financial transactions The functional areas of a business Two main stages in the evolution of information systems Three roles of accountants in an information system

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Internal & External Information Flows

Internal Information Flows

Horizontal flows of information used primarily at the

operations level to capture transaction and operations data Vertical flows of information

downward flows instructions, quotas, and budgets upward flows aggregated transaction and operations data

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Information Requirements
Each user group has unique information

requirements. The higher the level of the organization, the greater the need for more aggregated information and less need for detail.

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Information in Business
Information is a business resource that:

needs to be appropriately managed is vital to the survival of contemporary businesses

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What is a System?
A group of interrelated multiple components or

subsystems that serve a common purpose System or subsystem?

A system is called a subsystem when it is viewed as a component of a larger system. A subsystem is considered a system when it is the focus of attention.

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System Decomposition versus System Interdependency

System Decomposition

the process of dividing the system into smaller subsystem parts

distinct parts are not self-contained they are reliant upon the functioning of the other parts of the system all distinct parts must be functioning or the system will fail

System Interdependency

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What is an Information System?

An information system is the set of formal procedures by which data are collected, processed into information, and distributed to users.

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Transactions
A transaction is a business event. Financial transactions

economic events that affect the assets and equities of the organization e.g., purchase of an airline ticket all other events processed by the organizations information system e.g., an airline reservation no commitment by the customer

Nonfinancial transactions

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Transactions, cont

Financial Transactions Nonfinancial

Information System

Information

User Decision Making

Transactions

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What is an Accounting Information System?

Accounting is an information system.

It identifies, collects, processes, and communicates economic information about a firm using a wide variety of technologies. It captures and records the financial effects of the firms transactions. It distributes transaction information to operations personnel to coordinate many key tasks.

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AIS versus MIS

Accounting Information Systems (AIS) process

financial transactions; e.g., sale of goods and nonfinancial transactions that directly affect the processing of financial transactions; e.g., addition of newly approved vendors
nonfinancial transactions that are not normally processed by traditional AIS; e.g., tracking customer complaints

Management Information Systems (MIS) process

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AIS versus MIS?

IS

AIS

MIS

GLS/FRS

TPS

MRS

Finance

Marketing

Production

HRS

Distribution

AIS Subsystems
Transaction processing system (TPS)

supports daily business operations

General Ledger/ Financial Reporting System

(GL/FRS)

produces financial statements and reports produces special-purpose reports for internal use

Management Reporting System (MRS)

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The General AIS Model

Data Sources
Data sources are financial transactions that enter the

information system from internal and external sources.

External financial transactions are the most common source of data for most organizations.

E.g., sale of goods and services, purchase of inventory, receipt of cash, and disbursement of cash (including payroll).

Internal financial transactions involve the exchange or movement of resources within the organization. E.g., movement of raw materials into work-in-process (WIP), application of labor and overhead to WIP, transfer of WIP into finished goods inventory, and depreciation of equipment.

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Transforming the Data into Information

Functions for transforming data into information

according to the general AIS model:

1. 2. 3. 4. Data Collection Data Processing Data Management Information Generation

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1. Data Collection
Capturing transaction data Recording data onto forms Validating and editing the data

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2. Data Processing
Classifying Transcribing Sorting Batching

Merging
Calculating Summarizing Comparing

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3. Data Management
Storing Retrieving

Deleting

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4. Information Generation
Compiling Arranging Formatting Presenting

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Characteristics of Useful Information

Regardless of physical form or technology, useful

information has the following characteristics:

Relevance: serves a purpose Timeliness: no older than the time period of the action it supports Accuracy: free from material errors Completeness: all information essential to a decision or task is present Summarization: aggregated in accordance with the users needs

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Information System Objectives in a Business Context

The goal of an information system is to support

the stewardship function of management management decision making the firms day-to-day operations

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Organizational Structure
The structure of an organization helps to allocate

responsibility authority accountability

Segmenting by business function is a very common

method of organizing.

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Functional Areas
Inventory/Materials Management

purchasing, receiving and stores production planning, quality control, and maintenance

Production

Marketing Distribution Personnel Finance Accounting Computer Services

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Accounting Independence
Information reliability requires accounting

independence.

Accounting activities must be separate and independent of the functional areas maintaining resources. Accounting supports these functions with information but does not actively participate. Decisions makers in these functions require that such vital information be supplied by an independent source to ensure its integrity.

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The Computer Services Function

Distributed Data Processing Most companies fall in between. Centralized Data Processing All data processing is performed by one or more large computers housed at a central site that serves users throughout the organization. Primary areas: database administration data processing systems development systems maintenance

Reorganizing the computer services function into small information processing units that are distributed to end users and placed under their control

Organization of Computer Services Function in a Centralized System

Organizational Structure for a Distributed Processing System

Potential Advantages of DDP

Cost reductions in hardware and data entry tasks Improved cost control responsibility Improved user satisfaction since control is closer to the

user level Backup of data can be improved through the use of multiple data storage sites

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Potential Disadvantages of DDP

Loss of control

Mismanagement of company resources

Hardware and software incompatibility Redundant tasks and data Consolidating tasks usually segregated Difficulty attracting qualified personnel Lack of standards

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Manual Process Model

Transaction processing, information processing, and

accounting are physically performed by people, usually using paper documents. Useful to study because:

helps link AIS courses to other accounting courses often easier to understand business processes when not shrouded in technology facilitates understanding internal controls

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The Evolution of IS Models: The Flat-File Model

Data Redundancy Problems

Data Storage - excessive storage costs of paper

documents and/or magnetic form Data Updating - changes or additions must be performed multiple times Currency of Information - potential problem of failing to update all affected files Task-Data Dependency - users inability to obtain additional information as needs change Data Integration - separate files are difficult to integrate across multiple users

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The Evolution of IS Models: The Database Model

An REA Data Model Example

R
Inventory
M Line items M

E
M

A
1
Party to

Sales
M M

Sales person

Pays for
M

Made to
1

Customer

Cash

Increases

Cash Collections M

Received from Received by

1 Cashier
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REA Model
The REA model is an accounting framework for

modeling an organizations

economic resources; e.g., assets economic events; i.e., affect changes in resources economic agents; i.e., individuals and departments that participate in an economic event Interrelationships among resources, events and agents

Entity-relationship diagrams (ERD) are often used to

model these relationships.

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Accountants as Information System Users

Accountants must be able to clearly convey their needs

to the systems professionals who design the system. The accountant should actively participate in systems development projects to ensure appropriate systems design.

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Accountants as System Designers

The accounting function is responsible for the

conceptual system, while the computer function is responsible for the physical system. The conceptual system determines the nature of the information required, its sources, its destination, and the accounting rules that must be applied.

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Accountants as System Auditors

External Auditors

attest to fairness of financial statements assurance service: broader in scope than traditional attestation audit evaluate IT, often as part of external audit
in-house IS and IT appraisal services

IT Auditors

Internal Auditors

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