Information Systems: Environments and Frameworks

The Information Environment

• Information flows in and out of an organization, involving internal users like management and employees
• External users include trading partners and stakeholders
• Trading partners are external users involved in customer sales, billing, purchasing, and inventory
• Stakeholders are entities inside or outside the organization with vested interests

Elements of a System

• A system consists of interrelated components or subsystems with a common purpose
• Systems must include multiple components
• Relatedness of components allows the system to achieve its purpose
• System vs. Subsystem is related to the larger system of which it is a part
• Purpose of a system serves at least one purpose, but it may serve several
• System decomposition is the method of dividing the system into smaller subsystem parts
• System interdependency means a system's success relies on properly functioning subsystems

An Information Systems Framework

• An information system uses procedures to collect, process, and distribute data to users
• Common elements of an information system are input, process, and output
• A transaction is an event that impacts an organization and gets processed by its information system
• Encompasses both financial and non-financial aspects
• A financial transaction is an occurrence impacting the assets and equality of the organization
• Measures economic impact in financial terms and is reflected in the company's accounts
• Nonfinancial transactions do not meet the requirements for financial transactions

The Accounting Information System

• Accounting Information Systems (AIS) are specialized systems for processing financial data
• AIS Handles financial and non-financial information that impacts financial transactions

Transaction Processing System

• (TPS) supports daily operations with reports, documents, and messages

General Ledger/Financial Reporting System (GL/FRS)

• Produces traditional financial statements and is non-discretionary

Management Reporting System (MRS)

• Provides internal management with financial reports for aid and decision making
• Aids with budgets, variance reports, and responsibility reports
• Is discretionary because it is less structured and a difficult challenge

Management Information System (MIS)

• A system that processes nonfinancial transactions and financial transactions
• Finance manages portfolio management systems and capital budgeting
• Marketing manages market, analysis, new product development, and product analysis
• Distribution manages warehouse organization, scheduling, delivery, vehicle loading
• Human resources manages job skill tracking systems and employee benefits

General Model for Accounting Information Systems (AIS)

• End users are broken into external and internal groups
• External end users include creditors, stockholders, investors, regulatory agencies, suppliers, and customers
• Internal end users Include all management at every level of the organization Data is facts but may not be processed and has no direct effect on the user
• Information causes the user to take an action that the otherwise could not, or would not have taken
• Data sources are financial transactions that input from either internal or external locations
• External data sources include the sale or purchase of goods, and cash receipts
• Internal data sources include Raw Materials going into Work In Progress being turned into Finished Goods, and depreciation
• Data collection is the first operational stage and requires relevance based on user needs
• Data collection must be efficient by only collecting data once and can be made available to all users
• Data processing manages all the resources used to convert daily transaction information

Database Management

• Special software system that regulates access for each user

Data Hierarchy

• Database is the physical repository for all financial and non-financial stored data
• Data attributes is the relevant characteristic of an entity stored
• Record is the complete set of a attributes for a single occurrence
• File is the complete set of records of an identical

Database Tasks

• Storage assigns keys to records and stores them
• Retrieval locates and presents existing records
• Deletion is the removal of obsolete and redundant records

Information Generation Considerations

• Compiling, arranging, formatting, and presenting information to users, requiring:
• Relevance: must serve a purpose
• Timeliness: must not be outdated
• Accuracy: must be free from material errors
• Completeness: no vital data missing
• Summarization: data should be aggregated with need for purpose

Feedback as system output:

• Internal sources such as inventory status reports
• External sources such as the level of uncollected customer accounts

Information System Objectives

• Supports daily operations, management decision making and the stewardship function
• Accountability to properly manage firm resources

Acquisition of Information Systems

• In-house development is the development of customized systems from scratch via Systems Development Life Cycle (SDLC) Purchase preprogrammed commercial systems from software vendors
• Turnkey systems are tested and ready for implementation off-the-shelf
• Backbone systems are a basic system on which to build, with preprogrammed logic and a unique user interface designed by the vendor
• Vendor-supported systems are custom systems client organizations purchase commercially rather than develop

Organizational Structure

• Organizational structure shows the distribution of responsibility, authority and accountability

Segments are functional units

• These can be geographic locations, product line, or areas specialized by job tasks

Materials Management

• Plan and control the materials inventory
• Purchasing is responsible for the ordering from vendors and include soliciting vendor bids
• Receiving counts and verifies the inventory ordered
• Stores takes physical custody of the inventory received and releases the resources into production

Production

• Conversion of raw materials, labor and FOH into finished goods along the product line
• Production planning is the scheduling of of materials, labor, and machinery
• Quality control monitors the manufacturing quality standards
• Maintenance keeps the firm’s machinery and manufacturing lines in running order.

Business Segments Include:

• Marketing manages product promotion, advertising, and market research
• Distribution manages activity of getting the product after the sale
• Personnel manages recruiting, training, continuing education, labor relations and compensation
• Finance manages the financial resources of banking treasury activities, portfolio management, credit evaluation, cash management

The Accounting Function

• Accounting manages information resources
• Captures and records the financial effects of the firm and distributes it to operations personnel
• Reliability is the property of information that makes it useful
• Accounting should be independent from the functional areas that have custody of physical resources

Information Technology Function

• Database Administration maintains data resources in a central location
• Database Processing is the operation that manages the computer resources
• Data control includes receiving transactions for processing
• Data conversion uses source data for transcribing the records
• Computer operations uses activities for data operations
• Data library is where safe storage for offline data files are stored
• System Development and Maintenance is where development of information is analyzed
• Maintenance keeps the information up to date

Data Processing systems

• Centralized data processing has data performed by large computers centrally Distributed data processing (DDP) reorganizes the IT function into small information processing units (IPUs) that are distributed and placed under data controllers.

Distributed Data Processing

• Drawbacks include mismanagement, incompatible hardware, redundant tasks, consolidating incompatible activities and lack of standards
• Advantages include cost reduction, cost control, improve user satisfaction, and backup

Evolution of Information System Models

• Manual systems were the original method
• Flatfile systems were individual static files that were unrelated
• Database Model uses the system to to control the files and manages the file
• Resources(Assets) Events (affects the resource) Agents (individuals that participate)
• REA transactions happen in relational databases in tables with a primary key.

Evolution of Information System Models

• Enterprise Resource Planning allows automation of data key business processes
• Users need professionals help designing the system
• System Designers evaluate the information needs of users and how to manage data
• Conceptual System are alternative designs for evaluation
• Physical system is the medium and method for capturing data
• Data storage captures data one time only and makes data available

System Auditors

• An expert who expresses an opinion about the fairness of a company’s financials
• Auditing function for an opinion presented to a company
• Substantive tests check the data in the content
• Control tests that establish internal control is functioning
• Information technology IT checks computer-based components through the audit

Accountant Roles

• Internal auditing helps house internal organizations
• There is external v internal auditors
• Fraud Audits
• A designer should maintain a neutrality between security and functionality

Explore information environments within organizations, including internal and external users. Understand system elements like components and purpose. Learn about information systems frameworks and their role in organizational success.