Accounting Information Systems:
1. SYSTEMS, DATA, AND INFORMATION
A system is:
(1) A set of interrelated components
(2) That interact
(3) To achieve a goal
a) Most systems are composed of smaller subsystems . . . b) Every organization has goals.
c) The susbsystems should be designed to maximize achievement of the organization’s goals d) Even to the detriment of the subsystem itself
i) EXAMPLE: The production department (a subsystem) of a company might have to forego its goal of staying within its budget in order to meet the organization’s goal of delivering product on time. e) Goal conflict occurs when the activity of a subsystem is not consistent with another subsystem or with the larger system. f) Goal congruence occurs when the subsystem’s goals are in line with the organization’s goals. g) The larger and more complicated a system, the more difficult it is to achieve goal congruence. h) The systems concept encourages integration (i.e., minimizing the duplication of recording, storing, reporting and processing). 2) Data are facts that are collected, recorded, stored, and processed by an information system. i) Organizations collect data about:
ii) Events that occur
iii) Resources that are affected by those events
iv) Agents who participate in the events
j) Information is different from data.
k) Information is data that have been organized and processed to provide meaning to a user. l) Usually, more information and better information translates into better decisions. m) However, when you get more information than you can effectively assimilate, you suffer from information overload. (4) Example: Final exams week!
n) When you’ve reached the overload point, the quality of decisions declines while the costs of producing the information increases. o) Benefits of information
* Benefits of information may include:
* Reduction of uncertainty
* Improved decisions
* Improved ability to plan and schedule activities
p) - Cost of producing information
* Costs may include time and resources spent:
* Collecating data
* Processing data
* Storing data
* Distributing information to users
q) Value of information
* Costs and benefits of information are often difficult to quantify, but you need to try when you’re making decisions about whether to provide information. Characteristics that make information useful:
* It reduces uncertainty by helping you predict what will happen or confirm what already has happened. * Reliability
* It’s dependable, i.e., free from error or bias and faithfully portrays events and activities. * Completeness
* It doesn’t leave out anything that’s important.
* You get it in time to make your decision.
* It’s presented in a manner you can comprehend and use. * Verifiability
* A consensus notion—the nature of the information is such that different people would tend to produce the same result. * Accessibility
* You can get to it when you need it and in a format you can use. 3) Information is provided to both:
v) External users
(5) External users primarily use information that is either: (a) MANDATORY INFORMATION—Required by a governmental entity, such as Form 10-K’s required by the SEC; or (b) ESSENTIAL INFORMATION—Required to conduct business with external parties, such as purchase orders. (6) In providing mandatory or essential information, the focus should be on: (c) Minimizing costs
(d) Meeting regulatory requirements
(e) Meeting minimum standards of reliability and usefulness vi) Internal Users...
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