Solution manual for Accounting Information Systems Controls and
Processes 4th Edition by Leslie Turner
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,Chapter 1 Solutions Introduction to AIS
Turner/Accounting Information Systems, 4e
Solutions Manual
Chapter 1
Concept Check
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Discussion Questions
(SO 1) How might the sales and cash collection processes at a Wal-Mart store differ
from the sales and cash collection processes at McDonald’s? Wal-Mart sells items
that are pre-priced and bar coded with that price. Therefore the cash registers at
Wal-Mart use bar code scanners. However, McDonalds sells fast foods that are not
bar coded. The cash registers at McDonalds use touch screen systems that require
a cashier to indicate the items purchased. The cash collection processes are not
different. In both cases, the employee collects the cash or credit card, and returns
any change.
(SO 1) Can you think of any procedures in place at McDonald’s that are intended to
ensure the accuracy of your order? Student responses may vary, however,
following are a few examples: Often, at either the drive-through or the inside cash
register, the customer can see a screen that displays the items ordered. In addition,
a fast food restaurant uses pre-designed slots to hold certain types of menu items.
When a customer orders a particular sandwich, the person filling the order knows
exactly which slot to pull the sandwich from. Each customer receives a printed
receipt with the items listed and the customer can verify the accuracy.
(SO 1) How might the sales and cash collection processes at Boeing Co. (maker of
commercial passenger jets) differ from the sales and cash collection processes at
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,Chapter 1 Solutions Introduction to AIS
McDonald’s? Boeing does not sell to end-user consumers; rather, it sells to
companies such as airlines. Therefore Boeing does not have stores, nor inventory
in stores, nor cash registers to process sales. Boeing is more likely to maintain a
sales force that visits potential customers to solicit sales. Those sales may be
entered by the salesperson into a laptop computer connected to Boeing’s network.
McDonald’s, on the other hand, sells to consumers, uses order input touch screens
at each location, and maintains supplies of perishable food products.
(SO 1) Are there business processes that do not in some way affect accounting
records or financial statements? There may be processes that do not directly affect
accounting records (such as recruiting and hiring a new employee), but all
processes have a direct or indirect affect on accounting records. All processes use
resources such as material or employee time. Therefore, all processes have
expenses related to those processes that will affect the accounting records.
(SO 2) Briefly describe the five components of an accounting information system.
Work steps within a business process that capture accounting data as the
business process occurs.
Manual or computer-based records that capture the accounting data from
the business processes.
Internal controls within the business process that safeguard assets and
ensure accuracy and completeness of the data.
Work steps that process, classify, summarize, and consolidate the raw
accounting data.
Work steps that generate both internal and external reports.
(SO 2) Describe how sales data are captured and recorded at a restaurant such as
Applebee’s. At most Applebee’s restaurants, a server writes the order on a pad and
carries that pad to a cash register. The server enters the order on a touch screen
terminal. The order information is then displayed on a terminal in the kitchen. When
the customer has finished the meal, the server prints a check and delivers the check
to the table. The customer pays the server by using cash or a credit card. The
server processes the payment on the touch screen register and returns the change
or credit card slip to the customer.
(SO 2) What occurs in an accounting information system that classifies accounting
transactions? For each business process that affects accounting records, the
accounting information system must capture any resulting accounting data, record
the data, process it through classification, summarization, and consolidation, and
generate appropriate reports.
(SO 2) What are the differences between internal reports and external reports
generated by the accounting information system? Internal reports are used by
management to oversee and direct processes within the organization. External
reports are the financial statements used by investors and creditors to make
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,Chapter 1 Solutions Introduction to AIS
decisions about investing or extending credit to the organization.
(SO 3) What types of businesses are in the supply chain of an automobile
manufacturer? The types of businesses in an automaker’s supply chain are often
manufacturers of parts used in cars. This would include manufacturers of tires,
batteries, steel, plastic, vinyl and leather, as well as many other manufacturers
making the thousands of parts in a car.
(SO 3) When a company evaluates a supplier of materials, what kinds of
characteristics might be evaluated? The supplier’s characteristics that are likely to
be evaluated include price and payment terms, quality, reliability of the materials, as
well as whether the supplier can deliver materials when needed.
(SO 3) How do you think a company may be able to influence a supplier to meet its
business processing requirements? A company may be able to influence a supplier
by choosing only suppliers that meet expectations regarding the terms of price,
quality, and delivery timing. Those suppliers that do not meet these expectations
may not be used in the future. This exerts some influence over suppliers, as the
suppliers will lose business if they do not meet the buyer’s requirements.
(SO 4) Describe any IT enablement that you have noticed at a large retail store such
as Wal-Mart or Target. The most noticeable IT enablement is the use of bar coded
systems on the products and how they are read by the cash registers.
(SO 4) How do you think the World Wide Web (WWW) has led to business process
reengineering at companies such as Lands End or J.Crew? Prior to the World Wide
Web, customers placed orders either on the phone or by mail. Both phone and mail
orders require employees to take the order and enter it into the computer system.
Using online sales, customers enter their own orders and no company personnel are
needed to key orders into the computer system. Therefore, there was a major
change in the number of people employed to key orders.
(SO 4) What two kinds of efficiency improvement result from business process
reengineering in conjunction with IT systems? The use of IT systems usually leads
to two kinds of efficiency improvements. First, the underlying processes are
reengineered (through rethinking and redesign) to be conducted more efficiently.
Second, the IT systems improve the efficiency of the underlying processes.
(SO 5) Explain the differences between a field, a record, and a file. A field is one set
of characters that make up a single data item. For example, last name would be a
field in a customer database. A record is a collection of related fields for a single
entity. For example, last name, first name, address, phone number, and credit card
number fields might make up a single customer record. A file is a collection of
similar records. For example, all customer records together make up a customer file.
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,Chapter 1 Solutions Introduction to AIS
(SO 5) Explain why random access files would be preferable to sequential access
files when payroll personnel are changing a pay rate for a single employee. When
the desired action is to access a single record, random access is preferable. If
sequential access storage is used, all records must be read in sequence until the
desired record is reached. On the other hand, random access allows a single record
to be accessed without the necessity of reading other records. This makes it more
efficient to access a particular employee record to change the pay rate.
(SO 5) Why do real-time systems require direct access files? If transactions are to
be processed online and in real-time, it is necessary that the computer access a
single record immediately. Thus, direct access files are required so the records can
be accessed in real-time.
(SO 5) Why is data contained in the data warehouse called nonvolatile? Each time
a new transaction is completed, parts of the operational data must be updated.
Therefore, the operational database is volatile – with constantly changing
information. However, the data warehouse does not change with each transaction.
The data warehouse is only changed when periodic updates occur. The data in the
data warehouse are nonvolatile because they do not change constantly.
(SO 5) How is an extranet different from the Internet? The extranet allows access
only to selected outsiders, while the Internet is open to an unlimited number of
outsiders (essentially anyone having access to the Internet). On the other hand,
extranets are typically used by companies to interact with specific suppliers and
customers who have been granted access to a company’s network.
(SO 6) Prepare a list of the types of businesses that you have been in that use point
of sale systems. Student responses may vary, but would likely include department
stores, grocery stores, specialty stores, restaurants, gas stations, and car washes.
(SO 6) What do you think would be the advantages of an e-payables system over a
traditional system that uses paper purchase orders and invoices? An e-payables
system should be faster and more efficient than a paper-based system. In addition,
fewer processing errors should be expected from an e-payables system.
(SO 7) Describe why enterprise risk management is important. All organizations
face risks and Enterprise Risk Management (ERM) assists managers in reducing
and controlling risk. ERM also involves personnel across the entire business
organization, as they implement strategies to achieve the organization’s objectives.
(SO 7) What is the difference between general controls and application controls?
General controls apply overall to the IT accounting system. They are controls that
are not restricted to any particular accounting application. An example of a general
control is the use of passwords to allow only authorized users to log into an IT-based
accounting system. Application controls are used specifically in accounting
applications to control inputs, processing, and output. Application controls are
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,Chapter 1 Solutions Introduction to AIS
intended to insure that inputs are accurate and complete, processing is accurate and
complete, and that outputs are properly distributed, controlled, and disposed.
(SO 7) In what way is a code of ethics beneficial to an organization? If top
management institutes a code of ethics and emphasizes this code by modeling its
principles and disciplining or discharging those who violate the code, it can help
reduce unethical behavior in the organization.
(SO 8) What roles do accountants have in relation to the accounting information
system? Accountants are users of the AIS, they assist in the design of the AIS, and
they are auditors of the AIS.
Brief Exercises
(SO 1) For each category of business processes (revenue, expenditure, conversion,
administrative), give an example of a business process. Student responses are likely
to vary greatly, as they may refer to any of the subprocesses within each category.
For example, the revenue processes include sales, sales returns, and cash
collections; the expenditure processes include purchasing, purchase returns, cash
disbursements, payroll, and fixed asset processes; the conversion processes include
planning, resource management, and logistics; administrative processes include
capital processes, investments, and general ledger processes. Accordingly, any
type of business process can be cited to answer this question, but the student must
match the example with the appropriate process.
(SO 2) Think of a company that you have worked for or with which you have done
business. Which departments within the company need reports generated by the
accounting information systems? Student responses are likely to vary greatly, as
nearly every department within a business organization uses reports generated by
the accounting information systems. For example, sales departments need customer
account information to help in their efforts to sell products to customers. Purchasing
departments need product information to help in their efforts to purchase products
needed in the business. These types of information are maintained in accounting
information systems. There are numerous additional examples that could apply.
(SO 3) Explain a supply chain linkage and give an example. A supply chain linkage
is the connection of activities in the supply chain, including the entities, processes,
and information flows that involve the movement of materials, funds, and related
information through the full logistics process – from the acquisition of raw materials
to the delivery of finished products to the end user. It therefore includes the linked
activities of vendors, service providers, customers, and intermediaries. In addition to
the example of McDonald’s buns given in the text, another example would be a shirt
sold by the Gap. The Gap’s supply chain linkage would likely include a supplier from
whom the shirt was purchased, a manufacturer who assembled and sewed the shirt,
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,Chapter 1 Solutions Introduction to AIS
a secondary supplier that provided the fabric from which the shirt was constructed,
and a farmer who raised cotton used to make the fabric.
(SO 4) Explain how business process reengineering occurs. Also, explain how it
differs from the typical changes in company policies. With business process
reengineering (BPR), the underlying business processes are reengineered to be
conducted more efficiently. In other words, a comprehensive rethinking and
redesign takes place in order to enhance performance of the process. A key
component of BPR is the leveraging of IT capabilities to improve process
efficiencies. BPR differs from typically organizational change in that it involves
“thinking outside the box” in order to offer completely new and improved methods for
business processes.
(SO 4, 6) Describe automated matching in the purchasing process and explain how
this IT enablement has improved efficiency in companies.
Microsoft Dynamics GP has automated purchase order matching functionality. This
functionality electronically matches a purchase order, receiving report and vendor
invoice within the system.
In MS Dynamics GP a vendor purchase order can be created and printed in the
system. The purchase order is sent to the vendor identifying the amount of the
authorized purchase. When the goods or services are received, the person
responsible for logging the receipt can pull up the original purchase order and
receive the items on the PO. If there are any discrepancies between what was
ordered and what was received the system adjusts for the discrepancies. Later when
the vendor invoices for the goods or services that were received, the matched PO
and receiving report can be selected and compared with the prices and quantities of
the items invoiced. If there are any differences between the amounts
ordered/received and invoiced, the system will adjust for the differences. This
automated matching of a PO/receiving report and vendor invoice eliminates the
need to manually match these items.
Automated matching is an example of IT enablement. In this example of IT
enablement, the process is more streamlined, efficient and reduces the likelihood of
errors..
(SO 5) For an accounts receivable system, what kind of data would be found in the
master files and transaction files, respectively? An accounts receivable master file
would include relatively permanent data necessary to process customer
transactions. This would include a record for each customer. The data in the
master file would likely include customer name, address, phone numbers, credit
limit, and current balance. A transaction file for accounts receivable would contain
the relatively temporary data that must be processed to update the master file, such
as details from individual sales and cash collection transactions from customers.
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,Chapter 1 Solutions Introduction to AIS
(SO 5) Describe the differences in the following three types of processing:
Batch processing involves the grouping of similar transactions to be processed
together;
Online processing involves processing individual transactions, one-at-a-time; and
Real-time processing is an online processing method that involves the immediate
processing of individual transactions.
(SO 5) The networks discussed in this chapter were LANs, Internet, intranet, and
extranet. Explain each. A LAN is a computer network that spans a relatively small
area such as a building or group of buildings within a business organization. The
Internet is the global computer network made up of millions upon millions of
computers and subnetworks throughout the world. An intranet is an organization’s
private computer network, accessible only by employees of that organization to
share data and manage projects. An extranet is an expansion of an intranet that
allows limited access to designated outsiders such as customers and suppliers.
(SO 7) Give a brief summary of each of the following:
enterprise risk management is an ongoing strategy-setting and risk assessment
process that is effected by top management but involves personnel across the
entire entity.
corporate governance is an elaborate system of checks and balances whereby a
company’s leadership is held accountable for building shareholder value and
creating confidence in the financial reporting process.
IT governance is the corporate governance process that applies specifically to
the proper management, control, and use of IT systems.
(SO 9) Describe why accountants should be concerned about ethics. Accountants
should be concerned about ethics because accounting information systems are
often the tools used to commit or cover up unethical behavior. Accountants need to
be aware of the possibility of fraud within the AIS so that they can help develop and
implement effective internal controls to reduce the risk of such unethical acts. In
addition, accountants need to be prepared to resist the temptation to commit
unethical acts and to avoid being coerced into assisting with a fraudulent cover-up.
(SO 9) Melanie Gibson is currently pursuing her accounting degree at Ohio State
University. She has excelled in each of her major courses to date; however, she
tends to struggle in her computer classes and with assignments requiring use of
computer technology. Nevertheless, Melanie confidently claims that she will
become an excellent accountant. Comment on the practical and ethical implications
of her position. Melanie is mistaken in her position for the following reasons:
Practically speaking, accountants need to be well-informed about the operation of
accounting information systems, which nearly always involve computer technology. The
AIS is the foundation of most accounting functions, so to resist computer technology
would be unreasonable, if not impossible. Also, in order to assist in developing internal
controls, accountants must understand the processes within the AIS, including the use
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,Chapter 1 Solutions Introduction to AIS
of technology, so that effective controls can be developed and implemented to reduce
risks.
Ethically speaking, accountants need to be well-informed about the operation of the AIS
so that they are poised to recognize fraud and errors that may occur. Without an
understanding of the underlying technology, accountants would be unable to effectively
capture and monitor business processes. Rather than fulfilling her responsibility as an
accountant to develop and implement internal controls, Melanie’s ignorance of the AIS
could actually allow fraud to be perpetrated without being prevented or detected.
For these reasons, Melanie’s viewpoint is quite dangerous.
Problems
(SO 2) If an accounting information system were entirely a manual system (no
computers used), explain how data would be captured, recorded, classified,
summarized, and reported. Discuss how the sophistication of the company’s
computer system impacts the accounting output and, alternatively, how the
requirements for accounting outputs impact the design of the accounting information
system. In a manual accounting information system, data would be captured on
source documents and recorded by hand in subledgers or special journals. Account
classifications would be determined by the accountants responsible for recording the
transaction. The accountants would perform mathematical computations to
summarize the records and post them to a general ledger. The general ledger
would be manually summarized at the end of the period so that financial statements
could be prepared. The financial reports would be manually compiled based on the
ending general ledger balances. Since a great deal of paper and human processing
are required for a manual system, it is prone to error. More sophisticated, computer-
based systems tend to produce more output that is more accurate because they are
programmed to process data consistently. They also use programming to perform
mathematical computations, which promotes accuracy and time savings. Therefore,
IT usage to support business processes results in increased accuracy, increased
efficiency, and reduced costs.
The requirements for accounting outputs impact the design of the AIS. Work
steps within a business process can be designed to capture data in a manner that is
consistent with the desired content and format of the related output. This promotes
efficiency and effectiveness of the overall process. When business process
reengineering is used to design business processes, IT systems can be introduced
to take advantage of the speed and efficiency of computers to enhance the AIS.
(SO 1,3) Classify each of the following processes as either a revenue process,
expenditure process, conversion process, or administrative process:
Selling common stock to raise capital - ADMINISTRATIVE
Purchasing electronic components to manufacture DVD players -
EXPENDITURE
Moving electronic components from the stockroom to the production floor to
begin making DVD players - CONVERSION
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, Chapter 1 Solutions Introduction to AIS
Paying employees at the end of a payroll period - EXPENDITURE
Preparing financial statements - ADMINISTRATIVE
Receiving cash payments from customers - REVENUE
Buying fixed assets - EXPENDITURE
Moving manufactured DVD players from the production floor to the warehouse -
CONVERSION
(SO 1) Business processes are composed of three common stages: an initial event,
a beginning, and an end. For items a through h listed in Problem 47, identify the
applicable initial event, beginning, and end of the process. Student responses may
vary as their experiences are likely to be different. Different businesses may have
different events that trigger these processes; however, the following are common
examples:
Selling common stock to raise capital: Initial Event – Contacting and
communicating with investors; Beginning – Receiving consideration from
investor; End – Recording transactions in the accounting records.
Purchasing electronic components to manufacture DVD players: Initial Event –
Receiving a purchase request from operations personnel; Beginning – Placing an
order with a supplier; End – Recording the payment for the component parts.
Moving electronic components from the stockroom to the production floor to
begin making DVD players: Initial Event – Receiving a request from the
Production department for the movement of materials; Beginning – Removing
inventory from the stockroom; End – Recording the receipt of goods in the
production area.
Paying employees at the end of a payroll period: Initial Event – Receiving a time
sheet or other record of time worked; Beginning – Recording hours in the payroll
records; End – Distributing paychecks or depositing paychecks in employee
accounts.
Preparing financial statements: Initial Event – Preparing end-of-period adjusting
entries; Beginning – Summarizing adjusted account balances; End – Compiling
data in financial statement format and writing related disclosure notes.
Receiving cash payments from customers: Initial Event – Communicating with
customer about a sale; Beginning – Notifying customer of amounts owed related
to the sale; End – Recording the receipt of cash and deposit in a bank account.
Buying fixed assets: Initial Event – Planning for an expenditure as part of a
capital budgeting process; Beginning – Placing an order for the fixed asset; End
– Receiving the asset and recording it in a subsidiary ledger.
Moving manufactured DVD players from the production floor to the warehouse:
Initial Event – Receiving notification from the Production department regarding
completion of products; Beginning – Removing finished goods from the
production floor; End – Recording the receipt of finished goods in the warehouse.
(SO 1,2,7) Each of the points listed next represents an internal control that may be
implemented within a company’s accounting information system to reduce various
risks. For each point, identify the appropriate business process (revenue,
Page 1-9
Processes 4th Edition by Leslie Turner
Hello all ,
We have all what you need with best price
Our email :
Our website :
testbanks-store.com
,Chapter 1 Solutions Introduction to AIS
Turner/Accounting Information Systems, 4e
Solutions Manual
Chapter 1
Concept Check
d
d
b
c
c
c
b
a
b
a
Discussion Questions
(SO 1) How might the sales and cash collection processes at a Wal-Mart store differ
from the sales and cash collection processes at McDonald’s? Wal-Mart sells items
that are pre-priced and bar coded with that price. Therefore the cash registers at
Wal-Mart use bar code scanners. However, McDonalds sells fast foods that are not
bar coded. The cash registers at McDonalds use touch screen systems that require
a cashier to indicate the items purchased. The cash collection processes are not
different. In both cases, the employee collects the cash or credit card, and returns
any change.
(SO 1) Can you think of any procedures in place at McDonald’s that are intended to
ensure the accuracy of your order? Student responses may vary, however,
following are a few examples: Often, at either the drive-through or the inside cash
register, the customer can see a screen that displays the items ordered. In addition,
a fast food restaurant uses pre-designed slots to hold certain types of menu items.
When a customer orders a particular sandwich, the person filling the order knows
exactly which slot to pull the sandwich from. Each customer receives a printed
receipt with the items listed and the customer can verify the accuracy.
(SO 1) How might the sales and cash collection processes at Boeing Co. (maker of
commercial passenger jets) differ from the sales and cash collection processes at
Page 1-1
,Chapter 1 Solutions Introduction to AIS
McDonald’s? Boeing does not sell to end-user consumers; rather, it sells to
companies such as airlines. Therefore Boeing does not have stores, nor inventory
in stores, nor cash registers to process sales. Boeing is more likely to maintain a
sales force that visits potential customers to solicit sales. Those sales may be
entered by the salesperson into a laptop computer connected to Boeing’s network.
McDonald’s, on the other hand, sells to consumers, uses order input touch screens
at each location, and maintains supplies of perishable food products.
(SO 1) Are there business processes that do not in some way affect accounting
records or financial statements? There may be processes that do not directly affect
accounting records (such as recruiting and hiring a new employee), but all
processes have a direct or indirect affect on accounting records. All processes use
resources such as material or employee time. Therefore, all processes have
expenses related to those processes that will affect the accounting records.
(SO 2) Briefly describe the five components of an accounting information system.
Work steps within a business process that capture accounting data as the
business process occurs.
Manual or computer-based records that capture the accounting data from
the business processes.
Internal controls within the business process that safeguard assets and
ensure accuracy and completeness of the data.
Work steps that process, classify, summarize, and consolidate the raw
accounting data.
Work steps that generate both internal and external reports.
(SO 2) Describe how sales data are captured and recorded at a restaurant such as
Applebee’s. At most Applebee’s restaurants, a server writes the order on a pad and
carries that pad to a cash register. The server enters the order on a touch screen
terminal. The order information is then displayed on a terminal in the kitchen. When
the customer has finished the meal, the server prints a check and delivers the check
to the table. The customer pays the server by using cash or a credit card. The
server processes the payment on the touch screen register and returns the change
or credit card slip to the customer.
(SO 2) What occurs in an accounting information system that classifies accounting
transactions? For each business process that affects accounting records, the
accounting information system must capture any resulting accounting data, record
the data, process it through classification, summarization, and consolidation, and
generate appropriate reports.
(SO 2) What are the differences between internal reports and external reports
generated by the accounting information system? Internal reports are used by
management to oversee and direct processes within the organization. External
reports are the financial statements used by investors and creditors to make
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,Chapter 1 Solutions Introduction to AIS
decisions about investing or extending credit to the organization.
(SO 3) What types of businesses are in the supply chain of an automobile
manufacturer? The types of businesses in an automaker’s supply chain are often
manufacturers of parts used in cars. This would include manufacturers of tires,
batteries, steel, plastic, vinyl and leather, as well as many other manufacturers
making the thousands of parts in a car.
(SO 3) When a company evaluates a supplier of materials, what kinds of
characteristics might be evaluated? The supplier’s characteristics that are likely to
be evaluated include price and payment terms, quality, reliability of the materials, as
well as whether the supplier can deliver materials when needed.
(SO 3) How do you think a company may be able to influence a supplier to meet its
business processing requirements? A company may be able to influence a supplier
by choosing only suppliers that meet expectations regarding the terms of price,
quality, and delivery timing. Those suppliers that do not meet these expectations
may not be used in the future. This exerts some influence over suppliers, as the
suppliers will lose business if they do not meet the buyer’s requirements.
(SO 4) Describe any IT enablement that you have noticed at a large retail store such
as Wal-Mart or Target. The most noticeable IT enablement is the use of bar coded
systems on the products and how they are read by the cash registers.
(SO 4) How do you think the World Wide Web (WWW) has led to business process
reengineering at companies such as Lands End or J.Crew? Prior to the World Wide
Web, customers placed orders either on the phone or by mail. Both phone and mail
orders require employees to take the order and enter it into the computer system.
Using online sales, customers enter their own orders and no company personnel are
needed to key orders into the computer system. Therefore, there was a major
change in the number of people employed to key orders.
(SO 4) What two kinds of efficiency improvement result from business process
reengineering in conjunction with IT systems? The use of IT systems usually leads
to two kinds of efficiency improvements. First, the underlying processes are
reengineered (through rethinking and redesign) to be conducted more efficiently.
Second, the IT systems improve the efficiency of the underlying processes.
(SO 5) Explain the differences between a field, a record, and a file. A field is one set
of characters that make up a single data item. For example, last name would be a
field in a customer database. A record is a collection of related fields for a single
entity. For example, last name, first name, address, phone number, and credit card
number fields might make up a single customer record. A file is a collection of
similar records. For example, all customer records together make up a customer file.
Page 1-3
,Chapter 1 Solutions Introduction to AIS
(SO 5) Explain why random access files would be preferable to sequential access
files when payroll personnel are changing a pay rate for a single employee. When
the desired action is to access a single record, random access is preferable. If
sequential access storage is used, all records must be read in sequence until the
desired record is reached. On the other hand, random access allows a single record
to be accessed without the necessity of reading other records. This makes it more
efficient to access a particular employee record to change the pay rate.
(SO 5) Why do real-time systems require direct access files? If transactions are to
be processed online and in real-time, it is necessary that the computer access a
single record immediately. Thus, direct access files are required so the records can
be accessed in real-time.
(SO 5) Why is data contained in the data warehouse called nonvolatile? Each time
a new transaction is completed, parts of the operational data must be updated.
Therefore, the operational database is volatile – with constantly changing
information. However, the data warehouse does not change with each transaction.
The data warehouse is only changed when periodic updates occur. The data in the
data warehouse are nonvolatile because they do not change constantly.
(SO 5) How is an extranet different from the Internet? The extranet allows access
only to selected outsiders, while the Internet is open to an unlimited number of
outsiders (essentially anyone having access to the Internet). On the other hand,
extranets are typically used by companies to interact with specific suppliers and
customers who have been granted access to a company’s network.
(SO 6) Prepare a list of the types of businesses that you have been in that use point
of sale systems. Student responses may vary, but would likely include department
stores, grocery stores, specialty stores, restaurants, gas stations, and car washes.
(SO 6) What do you think would be the advantages of an e-payables system over a
traditional system that uses paper purchase orders and invoices? An e-payables
system should be faster and more efficient than a paper-based system. In addition,
fewer processing errors should be expected from an e-payables system.
(SO 7) Describe why enterprise risk management is important. All organizations
face risks and Enterprise Risk Management (ERM) assists managers in reducing
and controlling risk. ERM also involves personnel across the entire business
organization, as they implement strategies to achieve the organization’s objectives.
(SO 7) What is the difference between general controls and application controls?
General controls apply overall to the IT accounting system. They are controls that
are not restricted to any particular accounting application. An example of a general
control is the use of passwords to allow only authorized users to log into an IT-based
accounting system. Application controls are used specifically in accounting
applications to control inputs, processing, and output. Application controls are
Page 1-4
,Chapter 1 Solutions Introduction to AIS
intended to insure that inputs are accurate and complete, processing is accurate and
complete, and that outputs are properly distributed, controlled, and disposed.
(SO 7) In what way is a code of ethics beneficial to an organization? If top
management institutes a code of ethics and emphasizes this code by modeling its
principles and disciplining or discharging those who violate the code, it can help
reduce unethical behavior in the organization.
(SO 8) What roles do accountants have in relation to the accounting information
system? Accountants are users of the AIS, they assist in the design of the AIS, and
they are auditors of the AIS.
Brief Exercises
(SO 1) For each category of business processes (revenue, expenditure, conversion,
administrative), give an example of a business process. Student responses are likely
to vary greatly, as they may refer to any of the subprocesses within each category.
For example, the revenue processes include sales, sales returns, and cash
collections; the expenditure processes include purchasing, purchase returns, cash
disbursements, payroll, and fixed asset processes; the conversion processes include
planning, resource management, and logistics; administrative processes include
capital processes, investments, and general ledger processes. Accordingly, any
type of business process can be cited to answer this question, but the student must
match the example with the appropriate process.
(SO 2) Think of a company that you have worked for or with which you have done
business. Which departments within the company need reports generated by the
accounting information systems? Student responses are likely to vary greatly, as
nearly every department within a business organization uses reports generated by
the accounting information systems. For example, sales departments need customer
account information to help in their efforts to sell products to customers. Purchasing
departments need product information to help in their efforts to purchase products
needed in the business. These types of information are maintained in accounting
information systems. There are numerous additional examples that could apply.
(SO 3) Explain a supply chain linkage and give an example. A supply chain linkage
is the connection of activities in the supply chain, including the entities, processes,
and information flows that involve the movement of materials, funds, and related
information through the full logistics process – from the acquisition of raw materials
to the delivery of finished products to the end user. It therefore includes the linked
activities of vendors, service providers, customers, and intermediaries. In addition to
the example of McDonald’s buns given in the text, another example would be a shirt
sold by the Gap. The Gap’s supply chain linkage would likely include a supplier from
whom the shirt was purchased, a manufacturer who assembled and sewed the shirt,
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a secondary supplier that provided the fabric from which the shirt was constructed,
and a farmer who raised cotton used to make the fabric.
(SO 4) Explain how business process reengineering occurs. Also, explain how it
differs from the typical changes in company policies. With business process
reengineering (BPR), the underlying business processes are reengineered to be
conducted more efficiently. In other words, a comprehensive rethinking and
redesign takes place in order to enhance performance of the process. A key
component of BPR is the leveraging of IT capabilities to improve process
efficiencies. BPR differs from typically organizational change in that it involves
“thinking outside the box” in order to offer completely new and improved methods for
business processes.
(SO 4, 6) Describe automated matching in the purchasing process and explain how
this IT enablement has improved efficiency in companies.
Microsoft Dynamics GP has automated purchase order matching functionality. This
functionality electronically matches a purchase order, receiving report and vendor
invoice within the system.
In MS Dynamics GP a vendor purchase order can be created and printed in the
system. The purchase order is sent to the vendor identifying the amount of the
authorized purchase. When the goods or services are received, the person
responsible for logging the receipt can pull up the original purchase order and
receive the items on the PO. If there are any discrepancies between what was
ordered and what was received the system adjusts for the discrepancies. Later when
the vendor invoices for the goods or services that were received, the matched PO
and receiving report can be selected and compared with the prices and quantities of
the items invoiced. If there are any differences between the amounts
ordered/received and invoiced, the system will adjust for the differences. This
automated matching of a PO/receiving report and vendor invoice eliminates the
need to manually match these items.
Automated matching is an example of IT enablement. In this example of IT
enablement, the process is more streamlined, efficient and reduces the likelihood of
errors..
(SO 5) For an accounts receivable system, what kind of data would be found in the
master files and transaction files, respectively? An accounts receivable master file
would include relatively permanent data necessary to process customer
transactions. This would include a record for each customer. The data in the
master file would likely include customer name, address, phone numbers, credit
limit, and current balance. A transaction file for accounts receivable would contain
the relatively temporary data that must be processed to update the master file, such
as details from individual sales and cash collection transactions from customers.
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(SO 5) Describe the differences in the following three types of processing:
Batch processing involves the grouping of similar transactions to be processed
together;
Online processing involves processing individual transactions, one-at-a-time; and
Real-time processing is an online processing method that involves the immediate
processing of individual transactions.
(SO 5) The networks discussed in this chapter were LANs, Internet, intranet, and
extranet. Explain each. A LAN is a computer network that spans a relatively small
area such as a building or group of buildings within a business organization. The
Internet is the global computer network made up of millions upon millions of
computers and subnetworks throughout the world. An intranet is an organization’s
private computer network, accessible only by employees of that organization to
share data and manage projects. An extranet is an expansion of an intranet that
allows limited access to designated outsiders such as customers and suppliers.
(SO 7) Give a brief summary of each of the following:
enterprise risk management is an ongoing strategy-setting and risk assessment
process that is effected by top management but involves personnel across the
entire entity.
corporate governance is an elaborate system of checks and balances whereby a
company’s leadership is held accountable for building shareholder value and
creating confidence in the financial reporting process.
IT governance is the corporate governance process that applies specifically to
the proper management, control, and use of IT systems.
(SO 9) Describe why accountants should be concerned about ethics. Accountants
should be concerned about ethics because accounting information systems are
often the tools used to commit or cover up unethical behavior. Accountants need to
be aware of the possibility of fraud within the AIS so that they can help develop and
implement effective internal controls to reduce the risk of such unethical acts. In
addition, accountants need to be prepared to resist the temptation to commit
unethical acts and to avoid being coerced into assisting with a fraudulent cover-up.
(SO 9) Melanie Gibson is currently pursuing her accounting degree at Ohio State
University. She has excelled in each of her major courses to date; however, she
tends to struggle in her computer classes and with assignments requiring use of
computer technology. Nevertheless, Melanie confidently claims that she will
become an excellent accountant. Comment on the practical and ethical implications
of her position. Melanie is mistaken in her position for the following reasons:
Practically speaking, accountants need to be well-informed about the operation of
accounting information systems, which nearly always involve computer technology. The
AIS is the foundation of most accounting functions, so to resist computer technology
would be unreasonable, if not impossible. Also, in order to assist in developing internal
controls, accountants must understand the processes within the AIS, including the use
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of technology, so that effective controls can be developed and implemented to reduce
risks.
Ethically speaking, accountants need to be well-informed about the operation of the AIS
so that they are poised to recognize fraud and errors that may occur. Without an
understanding of the underlying technology, accountants would be unable to effectively
capture and monitor business processes. Rather than fulfilling her responsibility as an
accountant to develop and implement internal controls, Melanie’s ignorance of the AIS
could actually allow fraud to be perpetrated without being prevented or detected.
For these reasons, Melanie’s viewpoint is quite dangerous.
Problems
(SO 2) If an accounting information system were entirely a manual system (no
computers used), explain how data would be captured, recorded, classified,
summarized, and reported. Discuss how the sophistication of the company’s
computer system impacts the accounting output and, alternatively, how the
requirements for accounting outputs impact the design of the accounting information
system. In a manual accounting information system, data would be captured on
source documents and recorded by hand in subledgers or special journals. Account
classifications would be determined by the accountants responsible for recording the
transaction. The accountants would perform mathematical computations to
summarize the records and post them to a general ledger. The general ledger
would be manually summarized at the end of the period so that financial statements
could be prepared. The financial reports would be manually compiled based on the
ending general ledger balances. Since a great deal of paper and human processing
are required for a manual system, it is prone to error. More sophisticated, computer-
based systems tend to produce more output that is more accurate because they are
programmed to process data consistently. They also use programming to perform
mathematical computations, which promotes accuracy and time savings. Therefore,
IT usage to support business processes results in increased accuracy, increased
efficiency, and reduced costs.
The requirements for accounting outputs impact the design of the AIS. Work
steps within a business process can be designed to capture data in a manner that is
consistent with the desired content and format of the related output. This promotes
efficiency and effectiveness of the overall process. When business process
reengineering is used to design business processes, IT systems can be introduced
to take advantage of the speed and efficiency of computers to enhance the AIS.
(SO 1,3) Classify each of the following processes as either a revenue process,
expenditure process, conversion process, or administrative process:
Selling common stock to raise capital - ADMINISTRATIVE
Purchasing electronic components to manufacture DVD players -
EXPENDITURE
Moving electronic components from the stockroom to the production floor to
begin making DVD players - CONVERSION
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Paying employees at the end of a payroll period - EXPENDITURE
Preparing financial statements - ADMINISTRATIVE
Receiving cash payments from customers - REVENUE
Buying fixed assets - EXPENDITURE
Moving manufactured DVD players from the production floor to the warehouse -
CONVERSION
(SO 1) Business processes are composed of three common stages: an initial event,
a beginning, and an end. For items a through h listed in Problem 47, identify the
applicable initial event, beginning, and end of the process. Student responses may
vary as their experiences are likely to be different. Different businesses may have
different events that trigger these processes; however, the following are common
examples:
Selling common stock to raise capital: Initial Event – Contacting and
communicating with investors; Beginning – Receiving consideration from
investor; End – Recording transactions in the accounting records.
Purchasing electronic components to manufacture DVD players: Initial Event –
Receiving a purchase request from operations personnel; Beginning – Placing an
order with a supplier; End – Recording the payment for the component parts.
Moving electronic components from the stockroom to the production floor to
begin making DVD players: Initial Event – Receiving a request from the
Production department for the movement of materials; Beginning – Removing
inventory from the stockroom; End – Recording the receipt of goods in the
production area.
Paying employees at the end of a payroll period: Initial Event – Receiving a time
sheet or other record of time worked; Beginning – Recording hours in the payroll
records; End – Distributing paychecks or depositing paychecks in employee
accounts.
Preparing financial statements: Initial Event – Preparing end-of-period adjusting
entries; Beginning – Summarizing adjusted account balances; End – Compiling
data in financial statement format and writing related disclosure notes.
Receiving cash payments from customers: Initial Event – Communicating with
customer about a sale; Beginning – Notifying customer of amounts owed related
to the sale; End – Recording the receipt of cash and deposit in a bank account.
Buying fixed assets: Initial Event – Planning for an expenditure as part of a
capital budgeting process; Beginning – Placing an order for the fixed asset; End
– Receiving the asset and recording it in a subsidiary ledger.
Moving manufactured DVD players from the production floor to the warehouse:
Initial Event – Receiving notification from the Production department regarding
completion of products; Beginning – Removing finished goods from the
production floor; End – Recording the receipt of finished goods in the warehouse.
(SO 1,2,7) Each of the points listed next represents an internal control that may be
implemented within a company’s accounting information system to reduce various
risks. For each point, identify the appropriate business process (revenue,
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