Accounting Information System Overview

External Stakeholders

• Stockholders, financial institutions, and government agencies are examples of external stakeholders
• These stakeholders receive information such as financial statements, tax returns, and stock transaction information

Information Objectives

• Organizations have three fundamental information objectives:
  • To support day-to-day operations
  • To support management decision making
  • To support the stewardship function of management

Stewardship

• Refers to managers’ responsibility to properly manage the firm's resources and report on their activities
• External users receive stewardship information through traditional financial statements and reports
• Internal managers receive stewardship information from responsibility reports

Information System

• An information system is a set of formal procedures that collect, store, process, and distribute data to users

Accounting Information System (AIS)

• AIS is focused on accounting information needs that support:
  • Financial reporting
  • Compliance with regulations
  • Internal management decision-making

Management Information System (MIS)

• MIS is focused on information that helps managers make decisions about:
  • Operations
  • Marketing
  • Finance
  • Human resources

Record

• A complete set of attributes for a single occurrence within an entity class
• Every record must be unique in at least one attribute, known as the primary key

File (or Table)

• A complete set of records of an identical class
• Examples include: AR, inventory, accounts payable, and payroll
• The collection of all files is the organization's database

Database Management Tasks

• Involves three fundamental tasks:
  • Storage
  • Retrieval
  • Deletion

Information Generation

• The process of compiling, arranging, formatting, and presenting information to users
• Includes operational documents, structured reports, and messages on computer displays

Network Administration

• Responsible for the effective functioning of the organization's network
• Includes configuring, implementing, and maintaining network equipment
• Monitors network activity, ensuring security and compliance

IT Outsourcing

• Organizations may outsource IT functions (hardware, software, and facilities) to third-party vendors
• This practice helps reduce costs and administrative burdens
• Outsourcing can involve:
  • Employee transfers
  • Offshore operations
  • Cloud computing

Cloud Computing

• Location-independent computing where shared data centers deliver hosted IT services over the internet
• Three main categories:
  • Software as a service (SaaS)
  • Infrastructure as a service (IaaS)
  • Platform as a service (PaaS)

Accountants' Roles in AIS

• Accountants play roles in both the design and audit of AIS
• As system designers, accountants:
  • Specify operational rules, reporting requirements, and internal controls
  • Collaborate with IT professionals on physical system design
  • Use system development teams to develop system solutions

Accountants' Roles in Auditing

• Accountants audit the accounting information system to ensure:
  • Accuracy
  • Completeness
  • Reliability of financial data
  • Compliance with regulations

IT Auditing

• Focuses on the security and effectiveness of the information system
• Ensures that IT systems are appropriately controlled and protected from fraud and abuse
• Assesses data integrity, system security, and application controls

Audit Process

• Includes internal and external audits
• Internal auditors:
  • Work within an organization
  • Provide assessments of internal controls
  • Report to management and the audit committee
• External auditors:
  • Provide independent assessments of financial statements
  • Report to shareholders and regulators

Audit Tests

• Auditors perform tests to gather evidence and evaluate the effectiveness of controls
• Examples include:
  • Substantive tests
  • Analytical procedures
  • Tests of controls

Accounting Independence

• Essential for auditors to provide objective and credible assessments
• Auditors must be independent of management and those whose financial information they audit
• Ensures that auditors are not influenced by conflicts of interest or undue pressure

System Design and Auditing

• System designers must understand auditing concepts and principles
• Knowledge of auditing helps ensure that systems:
  • Provide reliable information
  • Support effective controls
  • Meet the needs of auditors

This quiz covers the significance of external stakeholders, the fundamental information objectives organizations have, and the concept of stewardship in management. Additionally, it delves into the structure and function of an Accounting Information System (AIS) in supporting decision-making and reporting. Test your understanding of these core accounting principles.