AIS Chapter 1-4

Information Output

final step in the data processing cycle. Information is usually presented in one of three forms: a document, a report, or a query response.

Two Audit Opinions

financial statements operating effectiveness of internal controls

secondary activities

firm infrastructure, human resource management, technology development, procurement

integrated ERP system

transaction cycles + ledger and reporting with internal control

Disadvantages of ERP

- Cost - Amount of time required - Changes to business processes - Complexity - Resistance

advantages of blockchain

- accuracy, transparency, data consistency, trust - no need for third parties, single set of books, reduced cost - decentralization, efficiency, privacy, security, and provenance

AIS and Corporate Strategy

-An AIS is influenced by an organization's strategy. -A strategy is the overall goal the organization hopes to achieve (e.g., increase profitability). -Once an overall goal is determined, an organization can determine actions needed to reach their goal and identify the informational requirements (both financial and nonfinancial) necessary to measure how well they are doing in obtaining that goal.

A well thought out AIS can add value by:

-Improving the quality and reducing the costs of products or services -Improving efficiency -Sharing knowledge -Improving efficiency and effectiveness of its supply chain -Improving the internal control structure -Improving decision making

analytics can improve decision making by

-identifying a problem for management to solve -collecting the data needed to solve the problem -integrating actionable insights into the systems used to make decisions.

SOX requires an internal control report in public company annual reports that

1) states that mgt is resp for est and maintaining an adequate internal control system and 2) assesses the effectiveness of the company's internal controls. MW & SD. Engagement Letter—management assesses controls; auditors assess mgt. SD, MW, Qual Opinion

Blockhain transaction path

1. Initiate 2. Validate -public 51% vs private blockchain 3. Create the Block (1MB of data) 4. Calculate and insert hash 5. Complete transaction

3 way match

1. Purchase Order 2. Goods Receipt 3. Invoice Receipt

14 general characteristics that make information useful

1. access restricted 2. accurate 3. available 4. reputable 5. complete 6. concise 7. consistent 8. current 9. objective 10. relevant 11. Timely 12. Useable 13. Understandable 14. Verifiable

Primary vs supporting activities in value chain

1. direct value to customer 2. enable primary activities to be effective

purchase requisition

A document or electronic form that identifies the requisitioner; specifies the delivery location and date needed; identifies the item numbers, descriptions, quantity, and price of each item requested; and may suggest a supplier.

transaction file

A file that contains the individual business transactions that occur during a specific fiscal period. A transaction file is conceptually similar to a journal in a manual AIS.

general ledger

A ledger that contains all accounts needed to prepare financial statements

master file

A permanent file of records that stores cumulative data about an organization. As transactions take place, individual records within a master file are updated to keep them current.

four types of processing (CRUD)

Creating new records Reading, retreiving, or viewing existing data Updating previously stored records or data Deleting data

Steps in processing input are:

Capture transaction data triggered by a business activity (event). Make sure captured data are accurate and complete. Ensure company policies are followed (e.g., approval of transaction).

________ complement transaction processing databases by providing support for strategic decision making

Data warehouses

What is documentation?

Documentation explains how a system works, including the four W's (who what when where why) of data entry, data processing, data storage, information output, and system controls. It is a combination of data flows and narrative.

DBMS enables

Enables cross-functional teams, enables things like AGILE planning, enables visibility

ERP

Enterprise Resource Planning, a suite of applications called modules, a database, and a set of inherent processes for consolidating business operations into a single, consistent, computing platform.

Data Flow Diagrams (DFD)

Graphically illustrate movement of data between external entities and the processes and data stores within a system

value of information

Information is valuable when the benefits exceed the costs of gathering, maintaining, and storing the data.

Advantages of ERP

Integrated enterprise-wide single view of the organization's data which streamlines the flow of information Data captured once (i.e., no longer need sales to enter data about a customer and then accounting to enter same customer data for invoicing) Greater visibility and monitoring capabilities for management Improve access of control of the data through security settings Standardization of procedures and reports Improves customer service Increases productivity through automation

IoT

Internet of things. The network of physical devices connected to the Internet. It typically refers to smart devices with an IP address, such as wearable technology and home automation systems.

76% of All Chief Information Officers say 1 key to successful AIS Implementation is:

Planning Thoughtful chart of accounts allow for growth painful to fix

transaction processing

Process of capturing transaction data, processing it, storing it for later use, and producing information output, such as a managerial report or a financial statement.

queries

Questions the database can answer

Document Tools Important

Read, evaluate, prepare, communicate

Help drive behaviors to improve operational results

Reports

Basic Business Processes

Revenue Cycle Expenditure Cycle Production Cycle Payroll Cycle Financing Cycle

Figure 1.2 slide 20

S&S interaction in AIS

Slide 27 Ch 2

Sample Chart of accounts for S&S

Level 1 DFD

So level 1 is at an even lower level of detail more at a process level; reflects things like the tax rate tables This should also have an arrow showing disbursements to taxing authorities—FIT, SIT, FICA, etc

AIS Mapping

Start with end state, then build a bridge from now

Data Capture

Term for the various methods by which data can be entered into the computer so that it can be processed.

data cube

The common term for the representation of multidimensional data -data warehouses are table driven

Context Level Diagram

The highest level data flow diagramming that contains the least amount of detail. It is used to represent the system, its boundary and the external entities that interact with the system

Organizations must decide

What decisions they need to make? What information they need to make good decisions? How to gather and process the data needed to produce that information?

chart of accounts

a list of accounts used by a business Coding schemas that are well thought out to anticipate management needs are most efficient and effective

audit trail

a path that allows a transaction to be traced through a data processing system from point of origin to output or backward from output to point of origin

Business process

a set of related, coordinated, and structured activities and tasks, performed by a person, a computer, or a machine that help accomplish a specific organizational goal

business transactions

an agreement between two entities to exchange goods, services, or any other event that can be measured in economic terms by an organization

Data

are facts collected, recorded, and stored in the system

key strengths of flowcharts

are that they can easily capture controls via decision points, show manual vs. automated processes.

SOX requires management to

assess internal controls and auditors to evaluate the assessment

How do I typically work on process improvement?

by functional area-Sales, Service, Ops, HR, Finance How we are doing over time-yoy How does one get to best in class?

source documents

captures data at the source when the transaction takes place

The six key components of an AIS fulfill three important business functions:

collect and store data, transform data into information, safeguard the organization's assets and data

subsidiary ledger

contains the details related to a given general ledger account AR

The goal of the database approach is to

create an organization wide data base that stores all of the data needed to operate the business while linking data across various functions and eliminating redundancy.

machine-readable

data in a format that can be processed by a computer XBRL

system flowchart

depicts the relationships among system input, processing, storage, and output

Types of flow charts

document, system, program, internal controls

information overload

exceeding the amount of information a human mind can absorb and process, resulting in a decline in decision-making quality and an increase in the cost of providing information

Information

facts in context

Database Hierarchy

field, record, file, database

Updates to the five cycles go through the

general ledger

The flow of information between these users for the various business activities involves a

give-get exchange grouped into business processes or transaction cycles

IT is used to

help decision makers more effectively filter and condense information

primary activities

inbound logistics, operations, outbound logistics, marketing and sales, service

significant deficiency

is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness yet important enough to merit attention by those charged with governance.

Material Weakness

is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected, on a timely basis.

The data processing cycle

is a descriptive means of demonstrating the operations performed on data to make the information meaningful for decisions

Business Process Diagram (BPD)

is a visual way to represent the activities in a business process

supply chain

is an extended system that includes the organizations value chain as well as its suppliers, distributors, and customers

Cloud Computing

is the use of a browser to remotely access software, data storage, hardware, and applications

artificial intelligence (AI)

is the use of computer systems to simulate human intelligence processes such as learning, reasoning, and self-improvement

Data Analytics

is the use of software and algorithms to find and solve problems to improve business performance

General ledger contains summary

level data for each caption on financial statements. Subsidiary Ledger contains detailed data for any G/L account with many individual subaccounts. (A/R subledger shows each account by customer) The sum of all subledger accounts should roll up to the G/L account level.

Value Chain

links together the different activities within an organization that provide value to the customer

Engagement Letter

management assesses controls; auditors assess mgt assessment

data is stored in

master and transactional files

Data analytics applies

meaningful patterns in data to improve business performance

Business process diagrams can show the

organizational unit performing the activity

A strategy is the

overall goal the organization hopes to achieve

batch processing still done for

payroll and biling cycles

Key components of an AIS

people, procedures, data, software, IT, internal control

An AIS consists of

people, processes, technology, controls

The components of an IS

people, technology, organization

Critical factors to AIS Implementation success

planning timeline & team thorough testing run parallel

source document example

purchases from self checkout are grocery store

Blockchain

represents individual digital records, called blocks, linked together using cryptography in a single list, called a chain

AI is

responsive, decisive, adaptive, independent

Virtualization

running multiple systems simultaneously on one physical computer

transaction journals

sales

Coding Techniques

sequence, block, group, mnemonic

channel stuffing

shipping surplus inventory to wholesalers and retailers at an excessive rate

Information comes from

source documents

An AIS is influenced by an organization's

strategy

AIS is a

system that collects, records, stores, processes and refines data to produce actionable information for decision makers and provides adequate controls and security

real-time processing

the processing of database transactions in which the database is updated while the transaction is taking place

give-get exchange

transactions that happen a great many times, such as giving up cash to get inventory from a supplier and giving employees a paycheck in exchange for their labor

batch processing

updating done periodically, such as daily

internal control flowchart

used to describe, analyze, and evaluate internal controls, including identifying system strengths, weaknesses, and inefficiencies

a data warehouse

•is one or more large databases containing both detailed and summarized data for a number of years that is used for analysis not transaction processing

A database management systems

•manages and controls the data and the interfaces between the data and the application programs that use the data stored in the database.