ACC 444 EXAM 1
Chapter 1 * Introduction * System: set of two or more interrelated components that interact to achieve a goal. (systems consist of subsystems that support the larger system) * Goal conflict: when subsystem is inconsistent with the goals of another subsystem or with the system as a whole * Goal congruence: when a subsystem achieves its goals while contributing to the organization’s overall goal * Data: facts that are collected, recorded, stored and processed by an information system (activities, resource, people) * Information: data that have been organized and processed to provide meanings and improve the decision-making process (better decisions quantity and quality of information increase) * Information overload: when limits to the amount of information human mind can absorb and process are passes, resulting in a decline in decision making quality and increase in cost of providing that information * Information technology(IT): information designers use to help decision makers more effectively filter and condense information * Value of information: the benefit produced by the information minus the cost of producing it * Seven characteristics of useful information: relevant, reliable, complete, timely, understandable, verifiable, accessible (RRCTUVA) * Information needs and business process * Business process: a set of related, coordinated and structured activities and tasks that are performed by a person or by a computer or a machine, and that help accomplish a specific organizational goal * Transaction: it is an agreement between two entities to exchange goods or services or any other event that can be measured in economic terms by an organization * Transaction processing: the process that begins with capturing transaction data and ends with informational output * Give-get exchange: pairs of events (small number of give-get exchanges, but each type of exchange happens many times) * Five business processes or transaction cycles * Revenue cycle: Goods and services are sold for cash or a future promise to receive cash (give goods get cash) * Expenditure cycle: companies purchase inventory for resale or raw material to use in producing products in exchange for cash or a future promise to pay cash (give cash get goods/raw materials) * Production/ conversion cycle: where raw materials are transformed into finished goods (give labor and raw materials get finished goods) * Human resource/ payroll cycle: where employees are hired trained, compensated, evaluated, promoted and terminated (give cash get labor) * Financing cycle: where companies sell shares in the company to investors and borrow money and where investors are paid dividend and interest is paid on loan (give cash get cash)
Last activity for each transaction cycle: sending appropriate information to the other cycles various transaction cycles relate to one another and interface with general ledger and reporting system * General ledger and reporting system: used to generate information for both management and external parties * Accounting information system * Accounting information system: information providing vehicle for the language of business, it collects, records, stores and processes accounting and other data to produce information for decision makers * Six components of AIS: People, procedure, data, software, information technology, internal control ( PPDSII) * Six components of AIS fulfill three business functions
- Collect and store data about organization activities, resource and personal
- Transform data into information
- Provide adequate control to safeguard organization’s asset and data * Three factors that affecting the design of AIS P.13
- Information technology (affect other two)
- Business strategy
- Organizational culture * Predictive analysis: uses data warehouse and complex algorithms to forecast future events, based on historical trends and calculated probabilities * Value chain 5 primary activities: * Inbound logistics: receiving, storing and distributing the materials an organization uses to create the services and products it sell * Operations: transfer input into final product or services * Outbound logistics: activities distributing finished products or services to customers * Marketing and sales: help customers buy organization’s products or services * Services: provide post sale support to customers * Support activities:
Allow five primary activities to perform efficiently and effectively * Firm infrastructure: activities that allow an organization to function (including AIS) * Human resource: activities include recruiting, hiring, training and compensating employees * Technology: improve a product or service * Purchasing: procure things used to carry out primary activities * Supply chain
Manufacturing firms interacting with its suppliers and distributors, it can improve its performance by helping others in the supply chain to improve their performance

Chapter 2 * Data processing cycle * Manual system: data are entered into journals and ledgers maintained on paper * Computer based system: data are entered into computers and stored in files and databases * Data processing cycle: the operation performed on data to generate meaningful and relevant information. Data input, data storage, data processing and information output * Data input:
First step: capture transaction data and enter them into the system * Data collected about three facts:
- Activities of interest
- Resources affected by each activity
- People who participate in each activity * Turnaround document: company output sent to an external party, who often adds data to the document, and then are returned to the company as an input document * Source data automation: capture transaction data in machine-readable form at the time and place of their origin
Second step: make sure captured data are accurate and complete
Third step: make sure company policies are followed * Data storage
Ledgers:
* General ledgers: contain summary level data for every asset, liability, equity, revenue and expense account * Subsidiary ledger: contains detailed data for any general ledger account with many individual subaccounts * A general ledger account corresponding to a subsidiary account is a control account, sum of subsidiary balances should be equal to amount in general ledger control account * Coding * Coding: the systematic assignment of numbers or letters to items to classify and organize items * Sequence code: items are numbered consecutively to account for all items * Block code: block of numbers are reserved for special categories of data * Group code: two or more subgroup of digits used to code items, are often used in conjunction with block code * Mnemonic code: letters and numbers are interspersed to identify an item (derived from description and easy to memorize * Good coding system
- Be consistent with intended use
- Allow for growth
- Be as simple as possible to minimize cost
- Be consistent with the company’s organizational structure * Chart of accounts: list of numbers assigned to each general ledger account * General journal: record infrequent or non-routine transactions (need an explanation) * Specialized journal: record large numbers pf repetitive transactions * Audit trail: traceable path of a transaction through a data processing system from point of origin to final output, or backwards from final output to point of origin (use to check accuracy and validity of ledger posting) * Entity: something about which information is stored, such as employees, inventory items and customers * Attribute: characteristic of interest (example: name, address) * Field: intersecting rows and columns * Record: field containing data about an entity * File: group of related records * Master file: store cumulative information about an organization, they are permanent but individual records may change from time to time * Transaction file: contains individual business transactions that occur during a specific time * Database: a set of interrelated, centrally coordinated files * Data processing activities (CRUD)
- Creating new records
- Reading, retrieving or viewing existing data
- Updating previously stored data
- Deleting data * Batch processing: updating done periodically * Online, real-time processing: updating each transaction as it occurs * Online batch processing: combination of the two approach, where transaction data are entered and edited as they occur and stored for latter processing * Information output * Information usually present in three forms: documents, reports, queries * Documents: documents are records of transaction and other company’s data * Reports: reports are used by employees to control operational activities and by managers to make decisions and to formulate business strategies * Database query: provide the information needed to deal with problems and questions that need rapid action or answer (repetitive queries are developed by information system specialists, one-time queries are developed by users) * Enterprise resource planning (ERP): integrate all aspects of a company’s operations with a traditional AIS, it uses a centralized database to share information across business processes and coordinate activities

Chapter 5 * AIS Threat
- Natural and political disasters
- Software error and equipment malfunctions
- Unintentional acts
- Intentional acts * Fraud: gaining an unfair advantage over another person
Most computer fraud perpetrators are insiders with request access, skills and resources, because employees understand company’s system and its weakness and they are better able to commit and conceal a fraud, fraud perpetrators are referred to as white collar criminals * Misappropriation of assets: theft of company’s assets * Fraudulent financial reporting: intentional or reckless conduct, whether by act or omission that result in materially misleading financial statement * Fraud triangle: pressure, opportunity and rationalization
- Pressure: a person’s incentive or motivation to commit fraud (financial pressure, emotional pressure and person’s lifestyle)
- Opportunity: 1. Commit the fraud 2. Conceal the fraud 3. Commit the theft into personal gain * Lapping: a perpetrator steals the cash or checks customer A use to pay account receivable and use customer B’s payment to pay A’s receivables * Kitting: cash is created using the lag between the time a check is deposited and the time it clears the bank
- Rationalization: allows perpetrators to justify their illegal behavior (justification, attitude, personal integrity) * Computer fraud: fraud that requires computer technology knowledge to perpetrate, investigate or prosecute it
- Input fraud
- Processor fraud (authorized system use )
- Computer instruction fraud
- Data fraud
- Output fraud (displayed or printed out output)
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