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INFS7004 Accounting Information Systems


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Title: INFS7004 Accounting Information Systems

INFS7004 Accounting Information Systems
  • Lecture 1
  • (1) Introduction and (2) Course Overview

(1) Introduction Welcome
  • Welcome to INF7004 Accounting Information
  • 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

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.

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

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
  • This course provides the following pedagogical
    benefits for students studying accounting,
    information systems and information technology

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
  • 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.

  • 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
  • analyse the internal controls in organisations
    based on their understanding of the importance of
    organisational controls in the operation of
    enterprise systems such as SAP AG ERP systems.

  • describe the use of XBRL in organisations based
    on their understanding of the use of XBRL in
  • 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.

  • Hall, J., (2008), Accounting Information Systems,
    6th Edition, Thomson, South-Western, NJ
  • The Calvert SAP Work-Book will be available
    later in semester

  • 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)

  • 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.

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.
  • 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
  • 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.

  • 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
  • The four SAP accounting modules are-
  • module 1 Introduction to SAP
  • module 2 General Ledger
  • module 3 Accounts Payable and the Procurement
  • module 4 Accounts Receivable and the Sales Order

  • 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
    applies to the SAP system).

  • 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
  • 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 the Accounts Payable and the
    Procurement Process and Accounts Receivable and
    the Sales Order Process.

  • 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.

Lecture Timetable
  • See course outline http//

(2) Course Overview - Objectives
  • Primary information flows within the business
  • Accounting information systems and management
    information systems
  • The general model for information systems
  • Financial transactions from non-financial
  • The functional areas of a business
  • Two main stages in the evolution of information
  • Three roles of accountants in an information

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
  • upward flows aggregated transaction and
    operations data

Information Requirements
  • Each user group has unique information
  • The higher the level of the organization, the
    greater the need for more aggregated information
    and less need for detail.

Information in Business
  • Information is a business resource that
  • needs to be appropriately managed
  • is vital to the survival of contemporary

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.

System Decomposition versus System Interdependency
  • System Decomposition
  • the process of dividing the system into smaller
    subsystem parts
  • System Interdependency
  • 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

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.

  • 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
  • Nonfinancial transactions
  • all other events processed by the organizations
    information system
  • e.g., an airline reservation no commitment by
    the customer

Transactions, cont
Financial Transactions
Information System
User Decision Making
Nonfinancial Transactions
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.

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
  • Management Information Systems (MIS) process
  • nonfinancial transactions that are not normally
    processed by traditional AIS e.g., tracking
    customer complaints

AIS versus MIS?
AIS Subsystems
  • Transaction processing system (TPS)
  • supports daily business operations
  • General Ledger/ Financial Reporting System
  • produces financial statements and reports
  • Management Reporting System (MRS)
  • produces special-purpose reports for internal use

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
  • 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.

Transforming the Data into Information
  • Functions for transforming data into information
    according to the general AIS model
  • 1. Data Collection
  • 2. Data Processing
  • 3. Data Management
  • 4. Information Generation

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

2. Data Processing
  • Classifying
  • Transcribing
  • Sorting
  • Batching
  • Merging
  • Calculating
  • Summarizing
  • Comparing

3. Data Management
  • Storing
  • Retrieving
  • Deleting

4. Information Generation
  • Compiling
  • Arranging
  • Formatting
  • Presenting

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

Information System Objectives in a Business
  • The goal of an information system is to support
  • the stewardship function of management
  • management decision making
  • the firms day-to-day operations

Organizational Structure
  • The structure of an organization helps to
  • responsibility
  • authority
  • accountability
  • Segmenting by business function is a very common
    method of organizing.

Functional Areas
  • Inventory/Materials Management
  • purchasing, receiving and stores
  • Production
  • production planning, quality control, and
  • Marketing
  • Distribution
  • Personnel
  • Finance
  • Accounting
  • Computer Services

Accounting Independence
  • Information reliability requires accounting
  • Accounting activities must be separate and
    independent of the functional areas maintaining
  • 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.

The Computer Services Function
Distributed Data Processing
Centralized Data Processing
Most companies fall in between.
Reorganizing the computer services function into
small information processing units that are
distributed to end users and placed under their
All data processing is performed by one or more
large computers housed at a central site that
serves users throughout the organization. Primar
y areas database administration data
processing systems development systems maintenance
Organization of Computer Services Function in a
Centralized System
Organizational Structure for a Distributed
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

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

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
  • often easier to understand business processes
    when not shrouded in technology
  • facilitates understanding internal controls

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

The Evolution of IS Models The Database Model
An REA Data Model Example
Sales person
Cash Collections
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
  • economic agents i.e., individuals and
    departments that participate in an economic event
  • Interrelationships among resources, events and
  • Entity-relationship diagrams (ERD) are often used
    to model these relationships.

Accountants as Information System Users
  • Accountants must be able to clearly convey their
    needs to the systems professionals who design the
  • The accountant should actively participate
    in systems development
    projects to ensure
    appropriate systems design.

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.

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