Week 1

1. Week 1

2. ACTG 335 Accounting Information Systems Professor: Stacey Poli, CPA

3. Text/Packet info • Accounting Information Systems, 11th Edition; Romney and Steinbart • Systems Understanding Aid for Auditing, 7th Edition; Arens and Ward. • Otherwise known as Warren Distributing

4. Administrative – 1/2 • My website content: • Most updated Syllabus • Projects • Reading material (ID and Password available Monday via e-mail) • Power Points (avail. week following lecture)

5. Administrative – 2/2 • Registered Students must attend class first week or will be dropped. (Send e-mail to me if unable to attend but want to remain in class) • 5 spaces currently available to those on waiting list. Add in chronological registration order. Will identify during attendance today. See me at break. • Those remaining on waiting list see me after class on Thursday. I will let in additional students at that time.

6. Announcements • Send me an email. • Put “ACTG335- Summer 2009” in the subject line. • Send it from the email address you rely on for class info • Document name in text • Send it by 5:00, June 26th • Some readings and updates may be e-mailed to you, check weekly.

7. Class Decisions • Break(s)? • No break leave at about 8:00 • 1 break of about 10 minutes, leave at 8:10 And the winner is?

8. Class Expectations • See Syllabus handed out • READ CAREFULLY • Items of note: • Heavy workload outside of class • Keep up on readings; class content builds on itself • Ask questions!!!! • Participate

9. What we will cover in this course • General place of AIS in accounting • Conceptual place of AIS • Functionality • Documentation techniques • Business cycles • Accounting controls • Concepts—COSO/COBIT and ERM based • SOX- in general and as related to risks and controls • Database • What do accountants need to know • ERP system implementations • Special topics in accounting systems • Impacts and implications

10. What we will not cover in this course • Accounting calculations (leave your calculators at home) • Information technology (this is not an IT course) • One correct answer for all questions (logic matters)

11. What I hope you will take away • Why AIS are important to accountants • Basic understanding of business cycles • Ability to identify potential risks • Determine appropriate internal controls • Comfortable using common accounting software tools: MS Excel, MS Visio, MS Access • Ability to communicate/document AIS

12. What do you want out of this course • ????

13. Warren Distributing – why? • Exposes you to basic documents and records used to record the results of business activity. • Practical experience of basic business processes and there impact on the financial statements • Illustrates basic transaction flow through typical accounting system (transactions » source documents » journals » ledgers » trial balance » financial statements)

14. Warren Distributing - suggestions • Recommend do in stages, not all at once • Follow the Instructions, in order, located in the Instructions, Flowcharts and Ledgers book. Be sure to read pages 6 to 12 of this book before start project. Flowcharts contained in back of book are useful reference when performing related process. • Will provide check figures with e-mail on Monday. If do not match, give it about a half hour to find error. After that, ask me and I will help locate. • START NOW

15. Warren Distributing – Reference Book • Recommend read pages 7 to 31 of Reference book before beginning project; use the rest of the reference book as needed. • Reference book has examples of financial statements and other schedules required to be completed.

16. Warren Distributing - Other • Will provide class time on July 7th to allow comparison of answers with fellow students. Also I will provide guidance if not matching Check Figures. BRING MATERIAL TO CLASS. • No need to bring Warren to class except for July7th class and open packet quiz on July 16th. • Financial Statements are required to be system generated. Cash Flow statement not required at all.

17. Warren Distributing - specifics • More specifics are in your Syllabus – last page before class schedule, including deliverables • Be sure to use Transactions List A (blue paper), Option 2 • Year-end Procedure #5 – donot prepare Statement of Cash Flow • Will allow materiality level of $100

18. Homework • Bring to next class: • Example (does not have to be financial/accounting) of a process broken into 4 AIS Components (see Chapter 1) • Collect Data • Record Data • Store Data • Process Data

19. What is an Accounting Information System (AIS) • Interrelated components that interact to: • Collect • Record • Store • Process What? Data Resulting in? Information

20. Information • An effective AIS results in useful and meaningful information for decision makers (external-shareholders/auditors & internal-management/BOD) • What makes it useful and meaningful?

21. Desirable characteristics of information • Useful • Relevant • Reliable • Complete • Meaningful • Understandable • Verifiable • Credible • Timely • Accessible

22. Useful—Relevant • Connected to business objectives • Logical, supportable thread from metrics to objectives • Meaningful for the purpose intended, valid • Predictive value (leading) • Training, investment in IT, advertising • Feedback value (lagging) • ROI, net income, productivity

23. Useful—Reliable • Accurate for the purpose intended • Representational faithfulness • Verifiable • Neutral • meaning objective, but not purposeless • relieves us of the need to assess “values” of the data/information • Acknowledge inherent bias in any metric/measure

24. Useful—Complete • Covers the time frame required or indicated • Entire population are included, even if located in different locations or systems

25. Meaningful • Understandable • Avoid information overload • Match audience (numbers vs.. graphs vs. charts) • Make industry specific if appropriate • Sort according to requirements • Verifiable • Can trace back to source document, preferably external • Evidence of approval (e.g. signature, electronic correspondence)

26. Meaningful • Credible • What users value and trust • Assess and report on the accuracy of key sources • Institute a data-quality program for key data • Timeliness • Available within time required • Includes most current data • Accessibility • Physically • Cognitively

27. Measurement issues • What to measure, how often • Measurement attributes • What to report • Abstractions • What basis for measuring? For whom? To meet what objective(s)?

28. Lagging Indicators • Measures of output, end-process measures, record effects • Reflect past performance • Generally quantitative • Example: Quantity of toxic emission; last year’s percentage of on-time deliveries • Strength: Easy to quantify and understand, preferred by regulators and public—deterministic rather than probabilistic • Weakness: Time lag in feedback, ignore present activities

29. Leading Indicators • In-process metrics of performance, proactive • Reflect current status/activities—for future performance • Quantitative or qualitative • Example: percent of facilities conducting self-audit; training of logistics managers • Strength: Represent current actions and future trends • Weakness: Harder to build support for use, harder to track to performance—probabilistic rather than deterministic

30. Other AIS objectives • Provide adequate controls to mitigate risks • Integrate data to minimize duplication of effort and maximize efficiency

31. Factors influencing AIS design • Strategy • Information technology • Organizational culture • Societal demands • …what do we need to account FOR