Acct&MIS 531 Notes

Chapter 1 Accounting Information Systems: An Overview
2. Cycles (some are not the same period)
12 AIS adding value to an organization

Chapter 2 Elements and Procedures of General Ledger-Based Accounting Information Systems
29 Table 2.1 Business Activities (Integrated, one size fits all vs. Separate Systems)
33 Record Transaction Data in Journals (computer can eliminate posting to ind ledgers directly to financial stmts)
37 Chart of Accounts (set up so you can drop in #s to appropriate tax form)
42 Budgets (projections compared to)
44 Internal control, Segregation of Duties (explain this to your clerks)
InClass:

Types of Business Organizations: Sole Proprietor (form 1040, Sch C), Partnership (form 1065), Corp (S) (form 1120(S)
For tax purposes When is Balance Sheet required? (Partnership - assets > 600,000)

Memorize: Spend Cash D__________C
_ I xx

_ Receive Cash D__________C
_ xx I

For 2000 Payroll totals do not match clients expenses. Comment. Which number do you use?

Loan pmt category in Chart of Account. Prepare adjust entry for Tax purposes. Prepare reconcilliation using account analysis format.

Loan payment 6000
__Cash 6000

Interest 5000
__Loan payment 5000

Loan Balance 1000
__Loan payment 1000

Net profit per original income statement 120,000
less principal reduction not deductible 1,000
_ ----------
Taxable income 119,000

Chapter 3 Systems Development and Documentation Techniques
57 Documentation is the narrative, flowcharts, diagrams and other written material that explain how a system works.
65 Flowcharts (since a picture is worth 1000 words)
66 Flowchart Categories, Template
68 Computer System Flowcharts
69-71 Flowchart Symbols
71 Program Flowcharts
75 System Flowchart
76 Difference between system flowcharts & program flowcharts
77 Program Flowcharts for processing credit orders
Chapter Quiz 7, 8, 9 (p. 74 #4)
Problems 3.1, 3.2, 3.5,
3.15
c. credit approval
d. verify inventory
e. file one copy
f. file sales order
g. prepare bill of lading
h. copy 3 to truck driver
i. Match Bill of lading with Sales order
j. file the Bill of lading & Sales order
k. Customer purchase order
l. file Customer purchase order & Sales order
m. prepare invoice
n. to customer
o. update sales journal
p.
q. update accounts receivable
r. file sales invoice

Chapter 4 Introduction to Data Processing
94 Source documents
95 Layout of screens (forms) should resemble that of the source document. Nature of a succeeding question depends on the answer to a previous one. (smart form)
95 turnaround document - sent to an external party then returned (sales tax)
95 Source data automation - capture transaction data in machine - readable format the time and place of their origin
95 Focus 4.2 - Scanning text (character recognition) graphics
96 Field - physical space where data values are stored.
96 Record - fields grouped together.
96 File - related records grouped together
96 Data Base - set of interrelated central coordinated data files.
96 Master file, Transaction file
97 Files access and organization. Primary, Secondary Keys
98 File Organization - Sequential access, Indexed Sequential Access Method (ISAM) page 100 FIG 4.4, Direct access files, mathematical algorithim (hashing)
99 Linked list
102 Batch processing
104 On-line, real-time processing (interactive)
Chapter quiz 1 - 10
Discussion 4.4
Problems 4.1 Master file update

Chapter 4 Appendix: Information Technology Concepts
118 Sizes of computers
119 CPU - Arithmetic/Logic Unit (ALU), Control Unit
Bit - binary digit, Byte (character) = 8 bits
120 FIG 4a.2
120 Speed - MIPS
122 Secondary Storage - mag tape, mag disk, CD
124 Source Data Automation - MICR, OCR
125 UPC, bar codes
126 Resolution - how clear are the images
Monitors (resolution - dots accross the screen)
Printers (dots per inch, DPI)
127 Serial interface, Parallel interface, (USB new)
128 Computer languages Table 4A.2
129 Skip FIG 4A.5
132 Object Oriented Programming (OOP)
132 System Software, operating system (OS), graphical user interface GUI, (DOS was text-based)
133 Multitasking, virtual memory, utility programs, applications
134 Image processing Step one - (scan as a graphic or individual character recognition)

Chapter 5 Data Bases
143 FIG 5.1 Note: file approach - file 2 has some of the same items as file 1. Data base approach - reduce redundancy
144 DBMS Data base management system - program that manages & controls access to the data base.
144 Logical view v. Physical view. FIG 5.2 Record layout
145 Program - data independence
147 Data Dictionary - Table 5.1
147 Data Definition language (DDL) Table 5.2
149 Data Manipulation language
149 Data Query language
151 Relational data bases
152 Requirements of the Relational Data Model
1. Primary key unique, entity integrity rule
2. Every foreign key null OR correspond to another table, referential integrity rule
5. Every value in every row of a specific column be same type
6. Neither column order or row order is significant (physical order)
154 Table 5.6 & 5.7
155 The solution: A Set of Tables
156 Table 5.8
157 Delete anomaly
161 Data base systems and the future of accounting. Data base systems could lead to the abandonment of the double entry accounting model. (data stored in one record ie writing a check, replaces a double journal entry ie cash, expense account)

Chapter 6 Skip

Chapter 7 Electronic Commerce

215 B to B, B to C (B to B larger volume, ongoing relationships)
218 Electronic Funds Transfer EFT
218 Automated Clearing House (ACH)
222 LAN, WAN
225 Network Interface Card (NIC), Modems, Hub, Router
227 Figure 7.6 Digital, Analog signal (info?)
228 Bandwidth (capacity)
229 Coaxial Cable
230 Fiber Optics
237 Control Issues, Transaction validity, Proper authorization, Safeguarding Assets
238 Firewall - Hardware & Software
Quiz 2, 3, 4, 5, 6, 8, 9, 10
Discussion 7.2, 7.8

Chapter 8 Control and Accounting Information Systems
250 Table 8.1Threats to Accounting Information Systems
251 sabotage - intent to destroy a system, embezzlement - theft or misappropriation of assets
252 Why AIS threats are increasing. Information available to more workers
252 Inadequate protection (problem is downplayed, control implications not understood, control measures are time consuming)
253 Internal control is the plan of organization and the methods a business uses to safeguard assets. Internal control purposes are sometimes at odds with each other.
255 Foreign Corrupt Practices Act. Publicly owned corporations are now required to keep records that accurately and fairly reflect their transactions and assets in reasonable detail.
258 Management Philosophy
259 Audit Committee (board of directors)
260 Human Resources Policies & Procedures (forced vacation)
262 Segregation of Duties, Authorization, Recording & Custody (different VPs)
264 case - LA Dodgers
266 Independent Checks
Quiz 2, 4, 5, 6

Chapter 9 Computer - Based Information System Control
Computers provide opportunities for an organization to enhance its internal control
287 A significant problem in many companies - they do not have an effective security plan in place to insure the integrity their AIS
287 Segregation of duties within the system (Systems analysis/programmer)
289 Focus 9.1 Westpac (deadlines)
290 Physical v logical access, passwords (guessed, lost, written down)
291 Focus 9.2 Ensuring Password Integrity
292 Biometric identification
295 Data Encryption (I Explorer 128 bit encryption)
296 Parity Bit (storage devices) (packets, check sum)
298 Administrative doc, System doc, Operating doc
Minimizing system downtime - uninterruptible power supply (UPS) Fault Tolerance
Disaster Recovery Plans
1. Priorities for the recovery process
2. Backup data & program files, grandfather, father, son
3. Specific assignment
4. Complete documentation
5. Backup computer and telecomm facilities (hot site, cold site)
302 PCs & network of PCs - greater security risk
1. PCs are everywhere
2. PC users are less aware of importance of security & control
3. PC users are more proficient
4. Adequate segregation of duties difficult
Controls are important:
Train users in PC related control concepts
Locks on PCs
Establish policies & procedures for loading software
Backups
Utilities which wipe clean data
Boot up within a security system
Audit & record what users do
Educate on the risks of virus
303 Inventory PCs, software, users
304 Firewall
305 tunneling, physical connection
306 Table 9.1
308 Application controls - insure the accuracy of a specific application's inputs, files, program and outputs
Source data controls:
Key verification
Check digit verification
Pre-numbered forms sequence test
309 Input Validation Routines, sequence check, field check (check for field type)
310 Validity check (cust id) limit check, range check, reasonableness test, redundent data check, capacity check
311 Completeness check, Closed - loop verification
312 Transaction log, clear error messages
316 Summary & Case conclusion
Quiz 2, 3, 4, 5, 6, 8, 9, 10

Chapter 10 Computer Fraud
328 Integrative Case: $5 withholding
330 Fraud process 1) theft, 2)conversion, 3) concealment
331 lapping, kiting
331 why fraud occurs - pressure, opportunity, rationalization
332 Table 10.1
337 Most networks have a low level of security
339 Employee goofing (internet surfing)
340 Computer Fraud Techniques
342 Table 10.3
346 Computer virus
350 Make Fraud less likely to occur (use work PC only for work)
Quiz 1, 2, 3, 4, 5, 6, 7

Chapter 11 Auditing of Computer - Based Information Systems
376 Internal Auditing Systems
1. Review reliability and integrity of operating and financial information
2. Determine whether the systems are actually being followed
3. Review how assets are safeguarded & verify the existence of assets
4. Determine how effectively and efficiently company resources are utilized
5. Review company operations & programs ... weather they are meeting their objective
(review text)
376 Types of Internal Auditing Work. 1) Financial audit 2) Information systems audit 3) Operational or management audit
377 Inherent risk, Control risk, Detection risk
378 Overview of the audit procedure: Planning, Collection of evidence, evaluation, Communication
379 Materiality, reasonable assurance
381 Information Systems Audits
1. Security Provisions
2. Program development
3. Program modification
4. Processing transaction
5. Procedures for handling incorrect data
6. Data files accurate, complete and confidential
383 Table 11.1 Framework for Audit of computer security
Types of Errors and Fraud
Control Procedures
Audit Procedures: System Review
Audit Procedures: Test of Controls
Compensating Controls
384 Table 11.2 Framework for audit of program development
386 Table 11.3 Framework for Audit of Program Modification Procedures
388 Table 11.4 Framework for Audit of Computer Processing Controls
392 Table 11.5 Framework for Audit of Source data controls
395 Table 11.6 Framework for Audit of Data File Controls
397 Table 11.7 General functions of Computer Audit Software
Quiz 1, 2, 3, 4, 5, 6, 8, 10

Chapter 12 The Revenue Cycle: Sales and Cash Collection
One objective of the AIS in the revenue cycle is to support the performance of the organization's business activities by efficiently processing transaction data.
416 Sales Order Entry - responding to customers inquiries, checking & approving credit, checking inventory availability.
419 edit checks
422 Opportunities for using information technology, inefficiencies with batch processing, inline processing
423 customer order entry (bottom of page) (osu online registration)
424 Dell online ordering (product customization)
430 Types of billing systems, postbilling, prebilling
432 Methods for maintaining Accounts Receivable, open invoice method, balance forward method, cycle billing
434 Opportunities - speeding up cash flow with and online system
436 Cash collection
438 lockbox (w/bank)
441 Table 12.1 Threats
Quiz 1, 2, 3, 4, 5, 6, 7, 9,
Problem 12.5

Chapter 13 The Expenditure Cycle: Purchasing and Cash Disbursements
465 The expenditure cycle is a recurring set of business activities and related data processing operations associated with the purchase of and payment for goods and services
466 1. Requesting the purchases, 2. Ordering, 3. Receiving, 4.Approving invoices, 5. Paying
468 Request Goods - Inventory Control EOQ, MRP, JIT
471 Order Goods, vendor reliability (JIT)
472 Purchase Order document
477 Receiving, 478 receiving report
481 Approve vendor invoices, nonvoucher system, voucher system
484 Pay for Goods (mail)
488 Table 13.1 Threats - 498
Quiz 1, 2, 4, 7, 8

Chapter 14 The Production Cycle
517 bill of material (tied to Computer Aided Design CAD) operations list
518 Planning methods Manufacturing resource planning (MRP-II)
519 master production schedule
520 TABLE 14.1 (what's wrong with the calc?)
523 Cost accounting
Quiz 1,3, 4, 10

Chapter 15 The Human Resources Management / Payroll Cycle
550 Integrative Case
Lengthy delays required to obtain information on benefit and retirement plans
Inability to track employee skill development (too much outside hiring?, morale?, eval training effectiveness?)
552 Payroll system must be designed to meet government regulations as well as management's information needs
553 Employees as assets (discussion)
554 AIS must be designed to do more than just record time and attendance and prepare paychecks.
555 Master Payroll files - new hires, terminations, changes in payrate, deductions. Update tax rates.
558 Opportunities badge readers (others clock in an employee) (discussion - dial sweep)
561 Payroll register / deduction register
564 Opportunities Direct deposit
564 Payroll Service Bureaus (ADP etc)
566 Control Threats
1. Hiring Unqualified or Larcenous Employee
2. Violations of Employment Law
3 Unauthorized Changes to the Payroll Master file
4 Inaccurate Time data
5. Inaccurate Processing Payroll
6. Theft or Fraudulent Distribution of Paychecks
7. Loss or Unauthorized Disclosure of Data
578 Human Resource Management (HRM), payroll systems should they be integrated? Discussion
Quiz 1, 3, 4, 5, 6, 7, 8, 9, 10

Chapter 16 SKIP

Chapter 17 Introduction to Systems Development and Systems Analysis
615 Integrative Case: Shoppers Mart
616 Introduction: organizations need faster more reliable ways of obtaining information Reasons:
1. Changes in user or business needs
2. Technology changes
3. Improved business process
4. Competitive advantage
5. Productivity gains
6. Growth
7. Downsizing
618 Figure 17.1 Systems development life cycle:
1. Systems analysis
2. Conceptual Design
3. Physical Design
4. Implementation and Conversion
5. Operation and Maintenance
619 "Eventually a major modification or system is replacement is necessary and the SDLC begins again"
620 Project team (management, accounting, IS)
622 master plan, Fig 17.2
624 PERT
625 Gantt
627 Calculating Economic feasibility costs, benefits:
1. Payback period
2. Net present value (NPV)
3. Internal rate of return (IRR)
629 BEHAVIORAL ASPECTS OF CHANGE list - 630
631 Preventing Behavioral Problems ... Solicit user participation ...keep it simple
639 Figure 17.6
Quiz 1, 2, 3, 8

Chapter 18 AIS Development Strategies
567 Introduction:
1. Numerous AIS projects
2. New AIS not meeting user needs
3. Development takes to long - no longer meets users needs (shooting at a moving target)
4. Users are unable to specify their needs
5. Changes after specifications laid out
657 Purchase software (Cleveland State v Peoplesoft)
662 Table 18.1 (visit an organization which uses the vendors proposed product)
670 Outsourcing (Fiserve)
673 Risks ... locked in
Skip the rest of the chapter.