Accounting Information Systems

by Hall,James A.

• ISBN13: 9780324312959
• ISBN10: 0324312954
• Edition: 5th
• Format: Hardcover
• Copyright: 2006-02-15
• Publisher: South-Western College Pub

Summary

ACCOUNTING INFORMATION SYSTEMS, 5th Edition provides thorough and up-to-date coverage of accounting information systems and related technologies. It features an early presentation of transaction cycles plus a special emphasis on ethics, fraud, and the modern manufacturing environment. The book's focus is on the needs and responsibilities of accountants as end users of systems, systems designers, and auditors. This latest edition provides complete integrated coverage of Sarbanes-Oxley as it effects internal controls and other relevant topics affected by this legislation, as well as re-organized discussion of transaction cycles that make the balance between manual and computer based systems more apparent.

Table of Contents

Part 1 Overview of Accounting Information Systems	1	(158)
The Information System: An Accountant's Perspective	3	(42)
The Information Environment	4	(13)
What Is a System?	5	(2)
An Information Systems Framework	7	(3)
AIS Subsystems	10	(1)
A General Model for AIS	11	(5)
Acquisition of Information Systems	16	(1)
Organizational Structure	17	(10)
Business Segments	17	(1)
Functional Segmentation	18	(3)
The Accounting Function	21	(1)
The Information Technology Function	22	(5)
The Evolution of Information System Models	27	(8)
The Manual Process Model	27	(1)
The Flat-File Model	27	(3)
The Database Model	30	(1)
The REA Model	31	(2)
ERP Systems	33	(2)
The Role of the Accountant	35	(2)
Accountants as Users	35	(1)
Accountants as System Designers	35	(1)
Accountants as System Auditors	36	(1)
Summary	37	(8)
Introduction to Transaction Processing	45	(66)
An Overview of Transaction Processing	46	(2)
Transaction Cycles	46	(1)
The Expenditure Cycle	46	(1)
The Conversion Cycle	47	(1)
The Revenue Cycle	48	(1)
Accounting Records	48	(10)
Manual Systems	48	(5)
The Audit Trail	53	(3)
Computer-Based Systems	56	(2)
Documentation Techniques	58	(15)
Data Flow Diagrams and Entity Relationship Diagrams	58	(4)
Flowcharts	62	(11)
Record Layout Diagrams	73	(1)
Computer-Based Accounting Systems	73	(9)
Differences between Batch and Real-Time Systems	73	(2)
Alternative Data Processing Approaches	75	(3)
Batch Processing Using Real-Time Data Collection	78	(2)
Real-Time Processing	80	(2)
Summary	82	(1)
Appendix	82	(29)
Ethics, Fraud, and Internal Control	111	(48)
Ethical Issues in Business	112	(5)
Business Ethics	112	(1)
Computer Ethics	113	(3)
Sarbanes-Oxley Act and Ethical Issues	116	(1)
Fraud and Accountants	117	(16)
Definitions of Fraud	118	(1)
Factors that Contribute to Fraud	119	(1)
Financial Losses from Fraud	120	(1)
The Perpetrators of Frauds	121	(2)
Fraud Schemes	123	(10)
Internal Control Concepts and Techniques	133	(11)
SAS 78 / COSO Internal Control Framework	137	(7)
Summary	144	(15)
Part 2 Transaction Cycles and Business Processes	159	(268)
The Revenue Cycle	161	(70)
The Conceptual System	162	(17)
Overview of Revenue Cycle Activities	162	(6)
Sales Return Procedures	168	(3)
Cash Receipts Procedures	171	(4)
Revenue Cycle Controls	175	(4)
Physical Systems	179	(1)
Manual Systems	180	(6)
Sales Order Processing	180	(3)
Sales Return Procedures	183	(1)
Cash Receipts Procedures	183	(3)
Computer-Based Accounting Systems	186	(15)
Automating Sales Order Processing with Batch Technology	187	(1)
Keystroke	188	(1)
Edit Run	188	(2)
Update Procedures	190	(1)
Reengineering Sales Order Processing with Real-Time Technology	190	(1)
Transaction Processing Procedures	190	(2)
General Ledger Update Procedures	192	(1)
Advantages of Real-Time Processing	193	(1)
Automated Cash Receipts Procedures	193	(2)
Reengineered Cash Receipts Procedures	195	(1)
Point-of-Sale (POS) Systems	195	(1)
Daily Procedures	196	(1)
End-of-Day Procedures	196	(2)
Reengineering Using EDI	198	(1)
Reengineering Using the Internet	198	(1)
Control Considerations for Computer-Based Systems	199	(2)
Computer-Based Accounting Systems	201	(1)
Computer Control Issues	201	(1)
Summary	202	(1)
Appendix	203	(28)
The Expenditure Cycle Part I: Purchases and Cash Disbursements Procedures	231	(52)
The Conceptual System	232	(13)
Overview of Purchases and Cash Disbursements Activities	232	(8)
The Cash Disbursements Systems	240	(2)
Expenditure Cycle Controls	242	(3)
Physical Systems	245	(4)
A Manual System	245	(2)
The Cash Disbursements Systems	247	(2)
Computer-Based Purchases and Cash Disbursements Applications	249	(10)
Automating Purchases Procedures Using Batch Processing Technology	249	(6)
Cash Disbursements Procedures	255	(1)
Reengineering the Purchases/Cash Disbursements System	255	(2)
Control Implications	257	(2)
Summary	259	(24)
The Expenditure Cycle Part II: Payroll Processing and Fixed Asset Procedures	283	(46)
The Conceptual Payroll System	284	(10)
Payroll Controls	292	(2)
The Physical Payroll System	294	(2)
Manual Payroll System	295	(1)
Computer-Based Payroll Systems	296	(3)
Automating the Payroll System Using Batch Processing	296	(1)
Reengineering the Payroll System	296	(3)
The Conceptual Fixed Asset System	299	(1)
The Logic of a Fixed Asset System	300	(1)
The Physical Fixed Asset System	300	(8)
Computer Based Fixed Asset System	300	(5)
Controlling the Fixed Asset System	305	(3)
Summary	308	(21)
The Conversion Cycle	329	(52)
World-Class Companies	330	(1)
The Traditional Manufacturing Environment	331	(12)
The Production System	331	(4)
The Economic Order Quantity Model	335	(4)
The Cost Accounting System	339	(1)
Controls in the Traditional Environment	340	(3)
The World-Class Manufacturing Environment	343	(12)
Manufacturing Flexibility	344	(1)
Physical Reorganization of the Production Facilities	345	(1)
Automation of the Manufacturing Process	345	(7)
Reduction of Inventories	352	(3)
Product Quality	355	(1)
Implications for Accounting and AIS	355	(8)
Changes in Accounting Techniques	355	(4)
Changes in Information Reporting	359	(4)
The World-Class Information System	363	(3)
Characteristics of the Traditional Information System	363	(1)
SAP: An Example of the World-Class Information System	364	(1)
Control Issues in the WCIS	364	(2)
Summary	366	(15)
Financial Reporting and Management Reporting Systems	381	(46)
Data Coding Schemes	382	(4)
A System without Codes	382	(1)
A System with Codes	383	(1)
Numeric and Alphabetic Coding Schemes	383	(3)
The General Ledger System	386	(3)
The Journal Voucher	387	(1)
The GLS Database	387	(2)
GLS Procedures	389	(1)
The Financial Reporting System	389	(2)
Sophisticated Users with Homogeneous Information Needs	389	(1)
Financial Reporting Procedures	389	(2)
Controlling the FRS	391	(2)
COSO / SAS 78 Control Issues	391	(2)
The Management Reporting System	393	(1)
Factors That Influence the MRS	393	(18)
Management Principles	394	(4)
Management Function, Level, and Decision Type	398	(2)
Problem Structure	400	(2)
Types of Management Reports	402	(3)
Responsibility Accounting	405	(3)
Behavioral Considerations	408	(3)
Summary	411	(16)
Part 3 Advanced Technologies in Accounting Information	427	(192)
Database Management Systems	429	(64)
Overview of the Flat-File vs. Database Approach	430	(3)
Data Storage	430	(1)
Data Updating	430	(1)
Currency of Information	430	(1)
Task-Data Dependency	430	(1)
The Database Approach	431	(1)
Flat-File Problems Solved	431	(1)
Controlling Access to the Database	432	(1)
The Database Management System	432	(1)
Three Conceptual Models	432	(1)
Elements of the Database Environment	433	(7)
Users	433	(1)
Database Management System	434	(4)
Database Administrator	438	(1)
The Physical Database	439	(1)
The Relational Database Model	440	(13)
Relational Database Concepts	441	(6)
The Data Normalization Process	447	(6)
Designing Relational Databases	453	(9)
Identify Entities	453	(2)
Construct a Data Model Showing Entity Associations	455	(2)
Add Primary Keys and Attributes to the Model	457	(1)
Normalize Data Model and Add Foreign Keys	457	(2)
Construct the Physical Database	459	(2)
Prepare the User Views	461	(1)
Databases in a Distributed Environment	462	(6)
Centralized Databases	462	(2)
Distributed Databases	464	(4)
Summary	468	(1)
Appendix	468	(25)
The REA Approach to Business Process Modeling	493	(34)
The REA Approach	494	(2)
User Views	494	(1)
The REA Model	494	(1)
Advantages of the REA Model	495	(1)
Value Chain Analysis	496	(1)
Database Applications	496	(9)
Order Entry and Cash Receipts System	496	(4)
Purchases and Cash Disbursements System	500	(3)
Limitations of Transaction-Based Systems	503	(1)
Traditional Approach to Modeling Business Processes	503	(2)
Developing an REA Model	505	(5)
Step 1	506	(1)
Step 2	506	(1)
Step 3	506	(2)
Step 4	508	(1)
Step 5	509	(1)
REA Models versus ER Diagrams	510	(8)
Defining the Entity Attributes	513	(1)
Creating User Views	514	(4)
Summary	518	(9)
Enterprise Resource Planning Systems	527	(36)
What is an ERP?	528	(3)
ERP Core Applications	529	(1)
Online Analytical Processing	530	(1)
ERP System Configurations	531	(5)
Server Configurations	531	(1)
OLTP versus OLAP Servers	532	(2)
Database Configuration	534	(1)
Bolt-on Software	534	(2)
Data Warehousing	536	(6)
Modeling Data for the Data Warehouse	536	(1)
Extracting Data from Operational Databases	537	(1)
Cleansing Extracted Data	537	(2)
Transforming Data into the Warehouse Model	539	(1)
Loading the Data into the Data Warehouse Database	540	(1)
Decisions Supported by the Data Warehouse	540	(1)
Supporting Supply Chain Decisions from the Data Warehouse	541	(1)
Risks Associated with ERP Implementation	542	(5)
Big Bang versus Phased-in Implementation	542	(1)
Opposition to Changes in the Business's Culture	543	(1)
Choosing the Wrong ERP	543	(2)
Choosing the Wrong Consultant	545	(1)
High Cost and Cost Overruns	546	(1)
Disruptions to Operations	547	(1)
Implications for Internal Control and Auditing	547	(4)
Transaction Authorization	547	(1)
Segregation of Duties	548	(1)
Supervision	548	(1)
Accounting Records	548	(1)
Access Controls	548	(2)
Auditing the Data Warehouse	550	(1)
Summary	551	(1)
Appendix	551	(12)
Electronic Commerce Systems	563	(56)
Intra-Organizational Networks and EDI	564	(1)
Internet Commerce	564	(14)
Internet Technologies	564	(3)
Protocols	567	(2)
Internet Protocols	569	(4)
Benefits from Internet Commerce	573	(5)
Risks Associated with Electronic Commerce	578	(5)
What is Risk?	578	(1)
Intranet Risks	578	(2)
Internet Risks	580	(3)
Security, Assurance, and Trust	583	(5)
Encryption	583	(1)
Digital Authentication	584	(2)
Firewalls	586	(1)
Seals of Assurance	586	(2)
Implications for the Accounting Profession	588	(4)
Privacy Violation	588	(4)
Summary	592	(1)
Appendix	592	(27)
Part 4 Systems Development Activities	619	(100)
Managing the Systems Development Life Cycle	621	(36)
The Systems Development Life Cycle	622	(2)
Participants in Systems Development	624	(1)
Systems Strategy	624	(1)
Assess Strategic Information Needs	624	(4)
Strategic Business Needs	625	(1)
Legacy Systems	625	(1)
User Feedback	626	(2)
Develop a Strategic Systems Plan	628	(1)
Create an Action Plan	629	(3)
The Learning and Growth Perspective	631	(1)
The Internal Business Process Perspective	631	(1)
The Customer Perspective	631	(1)
The Financial Perspective	631	(1)
Balanced Scorecard Applied to IT Projects	631	(1)
Project Initiation	632	(1)
Systems Analysis	632	(5)
The Survey Step	632	(3)
The Analysis Step	635	(2)
Conceptualization of Alternative Designs	637	(2)
How Much Design Detail is Needed?	637	(2)
Systems Evaluation and Selection	639	(9)
Perform a Detailed Feasibility Study	639	(1)
Perform Cost Benefit Analysis	640	(5)
Prepare Systems Selection Report	645	(1)
Announcing the New System Project	646	(1)
User Feedback	647	(1)
The Accountant's Role in Managing the SDLC	648	(1)
How Are Accountants Involved with SDLC?	648	(1)
The Accountant's Role in Systems Strategy	648	(1)
The Accountant's Role in Conceptual Design	648	(1)
The Accountant's Role in Systems Selection	649	(1)
Summary	649	(8)
Construct, Deliver, and Maintain Systems Project	657	(62)
In-House Systems Development	658	(4)
Tools for Improving Systems Development	658	(4)
Construct the System	662	(20)
The Structured Design Approach	662	(3)
The Object-Oriented Design Approach	665	(2)
System Design	667	(1)
Data Modeling, Conceptual Views, and Normalized Tables	668	(1)
Design Physical User Views	668	(7)
Design the System Process	675	(4)
Design System Controls	679	(1)
Perform a System Design Walkthrough	679	(1)
Program Application Software	680	(1)
Software Testing	681	(1)
Deliver the System	682	(6)
Testing the Entire System	682	(1)
Documenting the System	682	(3)
Converting the Databases	685	(1)
Converting to the New System	685	(1)
Post-Implementation Review	686	(1)
The Role of Accountants	687	(1)
Commercial Packages	688	(1)
Trends in Commercial Packages	688	(3)
Advantages of Commercial Packages	690	(1)
Disadvantages of Commercial Packages	690	(1)
Choosing a Package	691	(4)
Maintenance and Support	695	(1)
User Support	695	(1)
Knowledge Management and Group Memory	695	(1)
Summary	696	(1)
Appendix	696	(23)
Part 5 Computer Controls and Auditing	719
IT Controls Part I: Sarbanes-Oxley and IT Governance	721	(34)
Overview of Sections 302 and 404 of the Sarbanes-Oxley Act	722	(2)
Relationship Between IT Controls and Financial Reporting	722	(1)
Audit Implications of Sections 302 and 404	723	(1)
IT Governance Controls	724	(1)
Organizational Structure Controls	725	(6)
Segregation of Duties within the Centralized Firm	726	(2)
The Distributed Model	728	(1)
Creating a Corporate IT Function	729	(1)
Audit Objectives Relating to Organizational Structure	730	(1)
Audit Procedures Relating to Organizational Structure	731	(1)
Computer Center Security and Controls	731	(3)
Computer Center Controls	731	(3)
Disaster Recovery Planning	734	(5)
Providing Second-Site Backup	734	(1)
Identifying Critical Applications	735	(1)
Performing Backup and Off-Site Storage Procedures	736	(1)
Creating a Disaster Recovery Team	737	(1)
Testing the DRP	737	(1)
Audit Objective Assessing Disaster Recovery Planning	737	(1)
Audit Procedures for Assessing Disaster Recovery Planning	737	(2)
Summary	739	(1)
Appendix	739	(16)
IT Controls Part II: Security and Access	755	(38)
Controlling the Operating System	756	(7)
Operating System Objectives	756	(1)
Operating System Security	757	(1)
Threats to Operating System Integrity	757	(1)
Operating System Controls and Test of Controls	758	(5)
Controlling Database Management Systems	763	(4)
Access Controls	763	(3)
Backup Controls	766	(1)
Controlling Networks	767	(10)
Controlling Risks from Subversive Threats	767	(9)
Controlling Risks from Equipment Failure	776	(1)
Electronic Data Interchange Controls	777	(4)
Transaction Authorization and Validation	778	(1)
Access Control	779	(1)
EDI Audit Trail	779	(2)
Summary	781	(1)
Appendix	781	(12)
IT Controls Part III: Systems Development, Program Changes, and Application Controls	793
Systems Development Controls	794	(8)
Controlling Systems Development Activities	794	(2)
Controlling Program Change Activities	796	(1)
Source Program Library Controls	797	(1)
The Worst Case Situation: No Controls	798	(1)
A Controlled SPL Environment	798	(4)
Application Controls	802	(8)
Input Controls	802	(6)
Output Controls	808	(2)
Testing Computer Application Controls	810	(10)
Black Box Approach	811	(1)
White Box Approach	811	(2)
White Box Testing Techniques	813	(4)
The Integrated Test Facility	817	(1)
Parallel Simulation	818	(2)
Substantive Testing Techniques	820	(5)
The Embedded Audit Module	820	(1)
Generalized Audit Software	821	(4)
Summary	825
Glossary	1	(1)
Index	1