ACCOUNTING INFORMATI ON SYSTEMS: AN OVERV IEW

Accounting Information Systems 15th Edition, Global Edition Marshall B. Romney Paul John Steinbart Scott L. Summers David A. Wood Solutions Manual For 1 / 4

CHAPTER 1

ACCOUNTING INFORMATI ON SYSTEMS: AN OVERV IEW

SUGGESTED ANSWERS TO DISCUSSION QUESTION S

1.1 Discuss the concept of a system and the issues of goal conflict and goal congruence.

A system is a set of two or more components that are somehow interrelated and interact together to achieve a specific goal. A system usually consists of smaller components called subsystems. These subsystems have specific and defined functions, which interact with and support the larger system.The concept of systems is key to information technology and AIS. All systems, including the AIS, must work to achieve one or more organizational goals. Goal conflict results when a decision or action of a subsystem is inconsistent with another subsystem or the system (organization) as a whole. Goal congruence results when a subsystem achieves its goals while contributing to the organization's overall goal. Subsystems should maximize organizational goals.

1.2 Give an example of how an AIS can improve decision making and describe the multistep activities involved in the process.

Decision making is a complex, multistep activity: identify the problem, collect and interpret information, evaluate ways to solve the problem, select a solution methodology, and implement the solution. An AIS can provide assistance in all phases of decision making. Reports can help to identify potential problems. Decision models and analytical tools can be provided to users. Query languages can gather relevant data to help make the decision. Various tools, such as graphical interfaces, can help the decision maker interpret decision model results, evaluate them, and choose among alternative courses of action. In addition, the AIS can provide feedback on the results of actions.

An AIS can help improve decision making in several ways:

 It can identify situations requiring management action. For example, a cost report with a large variance might stimulate management to investigate and, if necessary, take corrective action. It can reduce uncertainty and thereby provide a basis for choosing among alternative actions. It can store information about the results of previous decisions, which provides valuable feedback that can be used to improve future decisions. For example, if a company tries a particular marketing strategy and the information gathered indicates that it did not succeed, the company can use that information to select a different marketing strategy. It can provide accurate information in a timely manner. For example, Walmart has an enormous database that contains detailed information about sales transactions at each of its stores. It uses this information to optimize the amount of each product carried at each store. It can analyze sales data to discover items that are purchased together and can use such information to improve the layout of merchandise or to encourage additional sales of related items. For example, Amazon uses its sales database to suggest additional books for customers to purchase.

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Ch. 1: Accounting Information Systems: An Overview

1.3 A software company in Munich is organizing a competition, inviting business ideas that promote the use of smartphone technology to conduct business. You enter your business plan, an initiative to involve unemployed teenagers and young adults from local communities to generate business and employment, and it was so well received that you were awarded a special prize of €5,000. You plan on using your prize money to implement your idea.

• Identify key decisions you need to make, the information you require to make these key

decisions, and the five major business processes you need to engage in.

• Identify the external parties with whom you would need to exchange information and

specify the information you will receive from these parties and the information that you will send to these parties.

The author uses this as a class discussion: the typical process the author follows is that students work through the content of a chapter before it is covered in class. Students are required to answer questions (such as this one) and submit it before the lecture. The author then assesses the answers, and, based on problems identified within the answers, the lecture content would be determined.

Students are thus required to complete the questions before coming to the class. In class, the students are divided into small groups (about 4 – 5 students per group). Each small group has to come to some consensus about the answers that they will present to the class. The groups could be randomly allocated, or the groups could be based on similarity in initial ideas.

A group is then selected (or a group can volunteer) to present their answers to the class. Since all students have had the opportunity to engage with the content prior to the presentation in class, there should be meaningful contributions and discussions about how the presented solutions could be improved.

Answers will vary, but the main aim is to get students to understand (for part a) how the business processes, key decisions, and information needs are all intertwined (as shown in Table 1-2). This then links to the external parties (part b) in Figure 1-1.

Since the scenario indicated the use of mobile phones to conduct business, students should ideally relate their answers to some form of retail (buying / selling of goods / services).1-2

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Accounting Information Systems 15e, GE

1.4 How do an organization’s business processes and lines of business affect the design of its AIS? Give several examples of how differences among organizations are reflected in their AIS.

An organization’s AIS must reflect its business processes and its line of business. For example:

 Manufacturing companies will need a set of procedures and documents for the production cycle; non-manufacturing companies do not. Government agencies need procedures to track separately all inflows and outflows from various funds, to ensure that legal requirements about the use of specific funds are followed. Financial institutions do not need extensive inventory control systems. Passenger service companies (e.g., airlines, bus, and trains) generally receive payments in advance of providing services. Therefore, extensive billing and accounts receivable procedures are not needed; instead, they must develop procedures to account for prepaid revenue. Construction firms typically receive payments at regular intervals, based on the percentage of work completed. Thus, their revenue cycles must be designed to track carefully all work performed and the amount of work remaining to be done. Service companies (e.g., public accounting and law firms) do not sell physical goods and, therefore, do not need inventory control systems. They must develop and maintain detailed records of the work performed for each customer to provide backup for the amounts billed.Tracking individual employee time is especially important for these firms because labor is the major cost component.

1.5 Figure 1-5 shows that organizational culture and the design of an AIS influence one another.What does this imply about the degree to which an innovative system developed by one company can be transferred to another company?

Since people are one of the basic components of any system, it will always be difficult to transfer successfully a specific information systems design intact to another organization. Considering in advance how aspects of the new organizational culture are likely to affect acceptance of the system can increase the chances for successful transfer. Doing so may enable the organization to take steps to mitigate likely causes of resistance. The design of an AIS, however, itself can influence and change an organization’s culture and philosophy. Therefore, with adequate top management support, implementation of a new AIS can be used as a vehicle to change an organization. The reciprocal effects of technology and organizational culture on one another, however, mean that it is unrealistic to expect that the introduction of a new AIS will produce the same results observed in another organization.

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