Discussion Questions

Chapter 1 Solutions Manual to accompany Accounting Information Systems, Cdn Ed Simkin et al.p.1 Chapter 1 Accounting Information Systems and the Accountant Discussion Questions 1-1. The answer to this question will vary with each university’s location. However, it is likely most students will reveal that their parents are employed in non-manufacturing jobs.Instructors may wish to emphasize that the large numbers of service sector employees and knowledge workers reflect a trend.1-2. This question is designed to encourage students to think about some of the information reporting limitations imposed by the traditional accounting general ledger architecture. Other activities that do not require journal entries include (1) obtaining a line of credit, (2) issuing purchase requisitions or purchase orders, (3) signing contracts, (4) hiring a new executive, and (5) sending financial information to investors or bank loan personnel. But instructors may wish to point out that important information about a company’s business transactions may be included in an annual report outside the financial statements. The management letters and footnotes in annual reports may reveal more about a company’s future prospects than the financial statements themselves.Managers have access to much more information than what is published in financial reports.Whether or not they would like to have access to more non-financial information, or if they would prefer that the accounting information system capture data about business events rather than accounting transactions, is debatable. It may also be a function of the accounting system in a particular company. Investors may wish to have more information available to them but the downside is that too much information can be just as problematic as too little information.1-3. The financial accounting systems we have known for more than 500 years are changing dramatically as a result of advances in information technology and financial accounting software. For example, databases allow accountants to collect and store all the data about a transaction or other file entity in one system, allowing those needing such information to retrieve it quickly, efficiently, and specifically in any format they wish. Financial data can be more easily linked to nonfinancial data as a result of database technology as well. Thus, it is likely that financial reporting will undergo tremendous change in the next few years as we learn to use technology more effectively in the design of financial AISs.ERP systems are another example of the information age's impact on financial accounting.Now, organizations capture more data and produce more information than ever before. This allows companies to integrate more of their financial and non-financial system, better forecast everything from raw materials requirements to finished product production, and to perform more sophisticated analyses of important business functions. For instance, sales can be examined at many different levels and organized according to criteria such as geography, customer, product, or salesperson at the touch of the keyboard.One of the most important changes in AISs is the way these systems will gather financial information in the future. Although many of these systems will continue to capture data in traditional batch mode or at POS sites, we expect newer systems to collect more of it on mobile devices—for example, cell phones, PDAs, and digital cameras. Because more employees are working from home these days, “digital commuting” may be another trend.Core Concepts of Accounting Information Systems 1st Canadian Edition 1e Mark Simkin Carolyn Norman Scott Paquette (Solutions Manual All Chapters, 100% Original Verified, A+ Grade) 1 / 4

Chapter 1 Solutions Manual to accompany Accounting Information Systems, Cdn Ed Simkin et al.p.2 1-4. The objective of a company’s financial statements is to communicate relevant financial information to such external parties as stockholders, investors, and government agencies. Issuing financial statements in XBRL formats contributes to this objective by making such financial data more searchable, comparable, informative, and therefore useful. Also, because XBRL enables companies to use standard tags to identify specific accounting values, the language itself therefore imposes a greater degree of standardization in the informational content of the reports. Finally, as suggested by Case-in-Point 1.7, XBRL also helps government agencies gather financial data that are more consistent, easier to understand, self-checking, and more quickly communicated. Chapter 14 contains more about XBRL, including the idea that the language also enables its users to verify accounting relationships as assets = liabilities

• net worth.

1-5. The questions asked here about suspicious activity reporting (SAR) require opinions from students. Regarding the first question, which asks if SAR activity should be a legal matter, here there is little room for disagreement because so much of SAR is mandated by such federal legislation as Annunzio-Wylie Anti-Money Laundering Act of 1992, the Bank Secrecy Act of 1996, and the Patriot Act of 2001. Although the number of SAR filings is large, less is known about how much of what appears to be suspicious are, in fact, violations of federal statutes.

1-6. This is another opportunity for students to practice their Internet search skills. Using the keywords “Canadian university and scorecard” students can find a number of examples of how universities are using metrics to help achieve their strategic goals. McMaster University library is one of those examples (http://library.mcmaster.ca/about-strategic-plan). McMaster University uses balanced scorecard as a planning, assessment, and decision-making tool for academic libraries.

1-7. The AICPA website lists hundreds of potential assurance services for CPAs to offer.These include productivity improvement, cost analysis, benchmarking, internal auditing quality assurance, compliance (e.g. Health Canada Privacy Act), CPA WebTrust for electronic commerce, and SysTrust. Several of the proposed assurance services are in the information technology management/security category. These include information systems security reviews, reviews of computer disks for unauthorized software, and audits of computerized controls. Classroom discussion might address the particular skills that CPAs would need for each of the proposed assurance service areas. Skepticism and integrity, for example, are two characteristics typically associated with public accountants.

It is interesting to learn which of the existing or proposed assurance services recommended by the AICPA will actually be offered by a given public accounting organization. Many of the larger firms already offer at least some of these services, and the largest accounting firms today derive a large portion of their revenues from professional services other than auditing and tax consulting. But the industry shake-up in 2002 may also prompt some accounting firms to scale back services and focus on only their auditing business.

The AICPA offers one-day training classes for those interested in certifying websites. Many auditors take advantage of this training but it is unclear at this point what the market for website verification services will be. So far, there have not been many adopters of WebTrust.

1-8. This question asks students to interview auditors from professional service firms and ask them whether or not the firms for which they work offer any assurance services. Hopefully, several firms do offer such services and instructors can use this as point of departure for additional discussion about such work. 2 / 4

Chapter 1 Solutions Manual to accompany Accounting Information Systems, Cdn Ed Simkin et al.p.3

1-9. Almost every traditional accounting job today requires at least some information systems skills. In addition, there are many job opportunities that require combined skills in both accounting and information systems. Consulting is one key area. For example, consultants help companies choose and install accounting software. They can also help companies with analyses of their business processes. Evaluating information systems security is another area of consulting where accounting and information systems skills are valuable. Tax planning, preparation, and consulting are yet other areas.

Prior research suggests that it is easier to train an accountant in information systems than vice versa. Whether this is true or not, it is certainly clear that accounting students with information systems skills are valuable employees. Individuals who are technically skilled at computers but lack knowledge about accounting concepts are handicapped when trying to help a company to develop and enhance its information systems. Their lack of accounting skills may lead their employer to install information systems that fail to meet their needs.

1-10. Employers of both accounting and IS personnel often rank “analytical reasoning” and “writing” skills on the same priority as technical skills, and some rank them even higher. Said one recruiter at the school of one author: “I can train new employees to use our computer systems and perform the majority of the technical tasks we will require of them. What I cannot train them to do is to think analytically or logically. And what I refuse to do is to teach them to speak and write clearly and effectively—skills they should have learned in high school.” Another recruiter said it slightly differently: “Give me a technically-competent accounting or IS student who can perform AIS tasks well, and I will pay them X dollars. Give me a student who can explain to my clients how our services can solve their business problems and I will pay them 2X dollars.”

There are several other attributes beyond “analytical thinking” and “writing” skills that many employers also value highly. One of them is “teamwork”—i.e., the ease and willingness of an employee to work with others instead of working alone. Another is “dedication”—i.e., the willingness and desire to get a given job done even if this means working more than 40 hours a week. A third is meticulousness—the attention to detail and the desire to get all the details correct. Finally, there is “selflessness”—the willingness to sacrifice personal goals, ego, and time in order to finish important organizational and professional projects.

Problems

1-11.

• AAA American Accounting Association
• ABC activity-based costing
• CICA Canadian Institute of Charted Accountants
• AIS accounting information systems
• CFO chief financial officer
• CISA certified information systems auditor
• CITP certified information technology professional
• CA chartered accountant
• CPM corporate performance measurement
• ERP enterprise resource planning
• FASB Financial Accounting Standards Board
• ISACA Information Systems Audit and Control Association 3 / 4

Chapter 1 Solutions Manual to accompany Accounting Information Systems, Cdn Ed Simkin et al.p.4

• IT information technology
• KPI key performance indicator
• OSC Operation Safe Commerce
• REA resources, events, and agents (database design framework)
• SAR suspicious activity reportingr. SEC Securities and Exchange

Commission

• SOX Sarbanes-Oxley (act)
• VARs value-added resellers
• XBRL extensible business reporting language

1-12. The number of articles in professional accounting journals that relate to information technology has grown significantly during the past several years. Almost every issue of these journals has a large number of articles on such topics as accounting software, electronic commerce, information systems security, SOX software, and new computer tools for accountants. Several now have separate “Technology” columns or sections devoted to IS topics or developments. Students completing this exercise are likely to conclude that “information technology” now influences almost every aspect of accounting.

1-13. This problem focuses on the human side of organizations—especially ways that employees might devise to “beat the system.” This problem is therefore especially useful in alerting students to the importance of designing and using systems that employees perceive as “fair,” and classroom discussions should reveal that employees can sabotage even the most cleverly-designed accounting systems.

• Organizations often use accounting measures such as return on investment (ROI) for

performance evaluation. Unfortunately, managers can manipulate these measures, at least in the short run, by either artificially increasing profits (the numerator) or decreasing assets (the denominator). Some ways to accomplish this are to (1) defer expenses, (2) maximize sales, (3) postpone maintenance on assets, (4) postpone investments in assets, or (5) using historical cost-based assets, adjusted by depreciation instead of market costs (which can result in an infinite return on investment once all the organization's assets have been fully depreciated). Where net profit is used in the calculation, Nehru's comment about including allocated overhead in deriving profit, is another argument against using return on investment.

There are many different performance measures that Acme might use—some quantitative and some qualitative. Other accounting measures include (1) segment margins, (2) units of sales, (3) increases in the number of customers, (4) increases in new customers, (5) measures of customer satisfaction, (6) decreases in sales returns, (7) employee complaints, and (8) employee turnover.

• Accounting numbers can frequently lead to dysfunctional behavior if their limitations are

not universally understood. For example, if the incentives are large enough or the penalties for underperformance are harsh enough, managers might be tempted to record “potential sales” as “actual sales” in a given time period, accelerate the depreciation of assets using alternate depreciation schedules, “forget” to subtract costs in computing returns, or sabotage the “returns” of other managers in order to improve their own performance values. Dysfunctional behavior may also surface if one number is used in isolation. For instance, return on investment discriminates against entities with larger investment bases. It also has the shortcomings mentioned above. However, ROI

• / 4