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Accounting Information System

An accounting information system (AIS) is composed of people, procedures, data, software, infrastructure, and controls. It collects transactional data from internal and external stakeholders, transforms it into useful information to support decision making, and provides controls to protect organizational assets and data. Specifically, an AIS fulfills three key functions: 1) collecting and storing organizational data, 2) transforming data into useful information for planning and decision making, and 3) providing adequate controls to safeguard assets and ensure accurate, reliable data. The CITP designation recognizes CPAs with expertise in both accounting and information technology.

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19 views

Accounting Information System

An accounting information system (AIS) is composed of people, procedures, data, software, infrastructure, and controls. It collects transactional data from internal and external stakeholders, transforms it into useful information to support decision making, and provides controls to protect organizational assets and data. Specifically, an AIS fulfills three key functions: 1) collecting and storing organizational data, 2) transforming data into useful information for planning and decision making, and 3) providing adequate controls to safeguard assets and ensure accurate, reliable data. The CITP designation recognizes CPAs with expertise in both accounting and information technology.

Uploaded by

Ashley Cullen
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Accounting Information System

SYSTEM

o A system is a set of two or more interrelated components that interact to achieve a goal.
o Systems are almost always composed of smaller subsystems, each performing a specific
function supportive of the larger system.
o When the systems concept is used in systems development, changes in subsystems cannot be made
without considering the effect on other subsystems and the system as a whole.
o Goal conflict occurs when a decision or action of a subsystem is inconsistent with another subsystem or
the system as a whole. 
o Goal congruence is achieved when a subsystem achieves its goals while contributing to the
organization’s overall goal.

DATA VS. INFORMATION


o Data are facts stored in the system
- A fact could be a number, date, name, and so on
For example:
1. 2/22/14
2. ABC Company, 123,
3. 99, 3, 20, 60

o The example above shows facts, if we put those facts within a context of a sales invoice, for
example, it is meaningful and considered information.

Invoice Date : 2/22/14 Invoice #: 123


Customer: ABC company
Item # Qty Price
99 3 $20
Total Invoice Amount $60

o Usually, more information and better information translates into better decisions.
o However, when you get more information than you can effectively assimilate, you suffer from
information overload.
o When you’ve reached the overload point, the quality of decisions declines while the costs of
producing the information increases.

VALUE OF INFORMATION

o Information is valuable when the benefits exceed the costs of gathering, maintaining, and
storing the data.
o Benefit (i.e., improved decision making)
> Cost (i.e., time and resources used to get the information)
WHAT MAKES INFORMATION USEFUL
There are seven general characteristics that make information useful:
1. Relevant: information needed to make a decision (e.g., the decision to extend customer credit
would need relevant information on customer balance from an A/R aging report)
2. Reliable: information free from error and bias
3. Complete: does not omit important aspects of events or activities
4. Timely: information needs to be provided in time to make the decision.
5. Understandable: information must be presented in a meaningful manner
6. Verifiable: two independent people can produce the same conclusion
7. Accessible: available when needed.

Transactional Information Between Internal and External Parties in an AIS


o Business organizations conduct business transactions between internal and external stakeholders.
o Internal stakeholders are employees in the organization (e.g., employees and managers).
o External stakeholders are trading partners such as customers and vendors as well as other
external organizations such as Banks and Government.
o The AIS captures the flow of information between these users for the various business transactions.

Interactions Between AIS and Internal and External Parties

BASIC BUSINESS PROCESS


o Transactions between the business organization and external parties fundamentally involve a
“give–get” exchange. These basic business processes are:
 Revenue: give goods/service—get cash
 Expenditure: get goods/service—give cash
 Production: give labor and give raw materials—get finished goods
 Payroll: give cash—get labor
 Financing: give cash—get cash

WHAT IS AN ACCOUNTING INFORMATION SYSTEM

o It can be manual or computerized


Consists of :
1. people
2. procedures and instructions
3. data
4. software
5. information technology infrastructure (computers, peripheral devices, and network
communications devices)
6. internal controls and security measures
Thus, transactional data is collected and stored into meaningful information from which business decisions
are made and provides adequate controls to protect and secure the organizational data assets.
These six components enable an accounting information system to fulfill three important business functions:
1. Collect and store data about organizational activities, resources, and personnel.
2. Transform data into information that is useful for making decisions so management can plan,
execute, control, and evaluate activities, resources, and personnel.
3. Provide adequate controls to safeguard the organization’s assets, including its data, to ensure that
the assets and data are available when needed and the data are accurate and reliable.

THE CITP DESIGNATION

o CITP: Certified Information Technology Professional


o Identifies CPAs who possess a broad range of technological knowledge and the manner in which
information technology (IT) can be used to achieve business objectives
o Reflects the AICPA’s recognition of the importance and interrelationship of IT with accounting

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