Accounting Information Systems, Global Edition

This is the eBook of the printed book and may not include any media, website access codes, or print supplements that may come packaged with the bound book. For undergraduate and graduate courses in Accounting Information Systems (AIS). A market-leading text with the most comprehensive, flexible coverage of AIS available Accounting Information Systems, 14th Edition covers all of the most recent updates in AIS, including how developments in IT affect business processes and controls, the effect of recent regulatory developments on the design and operation of accounting systems, and how accountants can use the AIS to add value to an organization. Not only will readers see how AIS has changed the role of an accountant, but they'll also be prepared for a successful accounting career in public practice, industry, or government. Cover......Page 1 Title Page......Page 4 Copyright Page......Page 5 Brief Contents......Page 6 Contents......Page 8 Preface......Page 20 Acknowledgments......Page 25 Part I: Conceptual Foundations of Accounting Information Systems......Page 28 Chapter 1: Accounting Information Systems: An Overview......Page 29 Introduction......Page 30 Information Needs and Business Processes......Page 31 Information Needs......Page 32 Business Processes......Page 33 Accounting Information Systems......Page 37 How an AIS Can Add Value to an Organization......Page 38 The Role of the AIS in the Value Chain......Page 40 Summary and Case Conclusion......Page 42 AIS in Action: Chapter Quiz......Page 43 Discussion Questions......Page 44 Problems......Page 45 Case 1-1: Ackoff’s Management Misinformation Systems......Page 48 AIS in Action Solutions: Quiz Key......Page 49 Chapter 2: Overview of Transaction Processing and Enterprise Resource Planning Systems......Page 51 Introduction......Page 52 Data Input......Page 53 Data Storage......Page 54 Information Output......Page 60 Enterprise Resource Planning (ERP) Systems......Page 62 AIS in Action: Chapter Quiz......Page 65 Discussion Questions......Page 66 Problems......Page 67 Case 2-1: Bar Harbor Blueberry Farm......Page 73 AIS in Action Solutions: Quiz Key......Page 74 Chapter 3: Systems Documentation Techniques......Page 77 Introduction......Page 78 Data Flow Diagrams......Page 79 Subdividing the DFD......Page 81 Types of Flowcharts......Page 85 Business Process Diagrams......Page 90 Summary and Case Conclusion......Page 92 AIS in Action: Chapter Quiz......Page 93 Discussion Questions......Page 94 Problems......Page 95 Case 3-1: Dub 5......Page 102 AIS in Action Solutions: Quiz Key......Page 103 Comprehensive Problem Solution......Page 105 Introduction......Page 111 Databases and Files......Page 112 Using Data Warehouses for Business Intelligence......Page 113 The Importance of Good Data......Page 114 Schemas......Page 115 Types of Attributes......Page 117 Designing a Relational Database for S&S, Inc.......Page 119 Basic Requirements of a Relational Database......Page 121 Creating Relational Database Queries......Page 122 Query 1......Page 124 Query 2......Page 126 Query 4......Page 127 Database Systems and the Future of Accounting......Page 129 Summary and Case Conclusion......Page 130 AIS in Action: Chapter Quiz......Page 131 Comprehensive Problem......Page 132 Problems......Page 133 Case 4-1: Research Project......Page 140 AIS in Action Solutions: Quiz Key......Page 141 Comprehensive Problem Solution......Page 142 Appendix: Data Normalization......Page 145 Second Normalization Example......Page 148 Part II: Control and Audit of Accounting Information Systems......Page 152 Chapter 5: Fraud......Page 153 Introduction......Page 154 AIS Threats......Page 155 Introduction to Fraud......Page 157 Misappropriation of Assets......Page 158 Fraudulent Financial Reporting......Page 159 Who Perpetrates Fraud and Why......Page 160 The Fraud Triangle......Page 161 The Rise in Computer Fraud......Page 165 Computer Fraud Classifications......Page 167 Preventing and Detecting Fraud and Abuse......Page 169 Summary and Case Conclusion......Page 170 AIS in Action: Chapter Quiz......Page 171 Discussion Questions......Page 172 Problems......Page 173 Case 5-1: David L. Miller: Portrait of a White-Collar Criminal......Page 177 Case 5-2: Heirloom Photo Plans......Page 179 AIS in Action Solutions: Quiz Key......Page 180 Introduction......Page 183 Computer Attacks and Abuse......Page 184 Social Engineering......Page 192 Malware......Page 197 Summary and Case Conclusion......Page 206 Key Terms......Page 207 AIS in Action: Chapter Quiz......Page 208 Problems......Page 209 Case 6-1: Shadowcrew......Page 219 AIS in Action Solutions: Quiz Key......Page 220 Chapter 7: Control and Accounting Information Systems......Page 223 Why Threats to Accounting Information Systems are Increasing......Page 224 Overview of Control Concepts......Page 225 The Foreign Corrupt Practices and Sarbanes–Oxley Acts......Page 226 COBIT Framework......Page 227 COSO’S Enterprise Risk Management Framework......Page 229 The Internal Environment......Page 231 Commitment to Integrity, Ethical Values, and Competence......Page 232 Human Resources Standards that Attract, Develop, and Retain Competent Individuals......Page 233 Objective Setting......Page 235 Risk Assessment and Risk Response......Page 236 Estimate Likelihood and Impact......Page 237 Implement Control or Accept, Share, or Avoid the Risk......Page 238 Proper Authorization of Transactions and Activities......Page 239 Segregation of Duties......Page 240 Project Development and Acquisition Controls......Page 242 Safeguard Assets, Records, and Data......Page 243 Independent Checks on Performance......Page 244 Monitoring......Page 245 Summary and Case Conclusion......Page 248 AIS in Action: Chapter Quiz......Page 249 Problems......Page 251 Case 7-1: The Greater Providence Deposit & Trust Embezzlement......Page 259 AIS in Action Solutions: Quiz Key......Page 260 Chapter 8: Controls for Information Security......Page 263 Introduction......Page 264 1. Security Is a Management Issue, Not Just a Technology Issue......Page 265 2. The Time-Based Model of Information Security......Page 266 Understanding Targeted Attacks......Page 267 Protecting Information Resources......Page 268 People: Training......Page 269 Process: User Access Controls......Page 270 Process: Penetration Testing......Page 273 IT Solutions: Network Access Controls......Page 274 IT Solutions: Device and Software Hardening Controls......Page 278 Physical Security: Access Controls......Page 281 Log Analysis......Page 282 Continuous Monitoring......Page 283 Chief Information Security Officer (CISO)......Page 284 Security Implications of Virtualization, Cloud Computing, and the Internet of Things......Page 285 Summary and Case Conclusion......Page 286 AIS in Action: Chapter Quiz......Page 287 Discussion Questions......Page 288 Problems......Page 289 Case 8-1: Assessing Change Control and Change Management......Page 293 AIS in Action Solutions: Quiz Key......Page 294 Chapter 9: Confidentiality and Privacy Controls......Page 297 Preserving Confidentiality......Page 298 Controlling Access to Sensitive Information......Page 299 Privacy Controls......Page 301 Privacy Concerns......Page 302 Privacy Regulations and Generally Accepted Privacy Principles......Page 304 Encryption......Page 305 Factors That Influence Encryption Strength......Page 306 Types of Encryption Systems......Page 307 Digital Signatures......Page 309 Digital Certificates and Public Key Infrastructure......Page 311 Summary and Case Conclusion......Page 312 AIS in Action: Chapter Quiz......Page 313 Problems......Page 315 Case 9-1: Protecting Privacy of Tax Returns......Page 319 AIS in Action Solutions: Quiz Key......Page 320 Introduction......Page 323 Input Controls......Page 324 Processing Controls......Page 326 Output Controls......Page 327 Illustrative Example: Credit Sales Processing......Page 328 Processing Integrity Controls in Spreadsheets......Page 329 Minimizing Risk of System Downtime......Page 330 Recovery and Resumption of Normal Operations......Page 331 Summary and Case Conclusion......Page 335 AIS in Action: Chapter Quiz......Page 336 Discussion Questions......Page 337 Problems......Page 338 Case 10-1: Ensuring Systems Availability......Page 345 Case 10-2: Ensuring Process Integrity in Spreadsheets......Page 346 AIS in Action Solutions: Quiz Key......Page 347 Chapter 11: Auditing Computer-Based Information Systems......Page 349 Introduction......Page 350 Overview of the Audit Process......Page 351 The Risk-Based Audit Approach......Page 353 Objective 1: Overall Security......Page 354 Objective 2: Program Development and Acquisition......Page 356 Objective 3: Program Modification......Page 357 Objective 4: Computer Processing......Page 358 Objective 5: Source Data......Page 361 Objective 6: Data Files......Page 362 Audit Software......Page 363 Summary and Case Conclusion......Page 365 AIS in Action: Chapter Quiz......Page 366 Discussion Questions......Page 367 Problems......Page 368 AIS in Action Solutions: Quiz Key......Page 375 Part III: Accounting Information Systems Applications......Page 378 Chapter 12: The Revenue Cycle: Sales to Cash Collections......Page 379 Introduction......Page 381 Threats and Controls......Page 383 Taking Customer Orders......Page 386 Credit Approval......Page 389 Checking Inventory Availability......Page 391 Responding to Customer Inquiries......Page 392 Shipping......Page 393 Pick and Pack the Order......Page 394 Ship the Order......Page 395 Invoicing......Page 398 Maintain Accounts Receivable......Page 400 Process......Page 404 Threats and Controls......Page 405 Summary and Case Conclusion......Page 407 AIS in Action: Chapter Quiz......Page 408 Problems......Page 409 AIS in Action Solutions: Quiz Key......Page 418 Chapter 13: The Expenditure Cycle: Purchasing to Cash Disbursements......Page 421 Introduction......Page 422 Process......Page 423 Threats and Controls......Page 426 Identifying What, When, and How Much to Purchase......Page 429 Choosing Suppliers......Page 432 Process......Page 436 Threats and Controls......Page 437 Process......Page 438 Threats and Controls......Page 440 Threats and Controls......Page 442 Summary and Case Conclusion......Page 444 AIS in Action: Chapter Quiz......Page 445 Discussion Questions......Page 446 Problems......Page 447 AIS in Action Solutions: Quiz Key......Page 456 Chapter 14: The Production Cycle......Page 459 Introduction......Page 460 Production Cycle Information System......Page 462 Threats and Controls......Page 463 Process......Page 464 Key Documents and Forms......Page 466 Threats and Controls......Page 470 Threats and Controls......Page 471 Process......Page 473 Threats and Controls......Page 474 Summary and Case Conclusion......Page 479 AIS in Action: Chapter Quiz......Page 480 Discussion Questions......Page 481 Problems......Page 482 AIS in Action Solutions: Quiz Key......Page 486 Chapter 15: The Human Resources Management and Payroll Cycle......Page 489 Introduction......Page 490 Overview of HRM Process and Information Needs......Page 491 Threats and Controls......Page 493 Payroll Cycle Activities......Page 496 Update Payroll Master Database......Page 497 Validate Time and Attendance Data......Page 498 Prepare Payroll......Page 501 Disburse Payroll......Page 504 Outsourcing Options: Payroll Service Bureaus and Professional Employer Organizations......Page 506 Summary and Case Conclusion......Page 507 AIS in Action: Chapter Quiz......Page 508 Discussion Questions......Page 509 Problems......Page 510 AIS in Action Solutions: Quiz Key......Page 516 Chapter 16: General Ledger and Reporting System......Page 519 Introduction......Page 520 General Ledger and Reporting System......Page 521 Threats and Controls......Page 522 Threats and Controls......Page 524 Process......Page 528 Process......Page 529 Threats and Controls......Page 534 Threats and Controls......Page 535 Summary and Case Conclusion......Page 540 AIS in Action: Chapter Quiz......Page 541 Problems......Page 542 Case 16-1: Exploring XBRL Tools......Page 547 AIS in Action Solutions: Quiz Key......Page 548 Part IV: The REA Data Model......Page 552 Introduction......Page 553 Database Design Process......Page 554 Entity-Relationship Diagrams......Page 555 The REA Data Model......Page 556 Structuring Relationships: The Basic REA Template......Page 557 Step 1: Identify Relevant Events......Page 560 Step 2: Identify Resources and Agents......Page 562 Step 3: Determine Cardinalities of Relationships......Page 563 Business Meaning of Cardinalities......Page 567 Uniqueness of REA Diagrams......Page 568 Summary and Case Conclusion......Page 569 AIS in Action: Chapter Quiz......Page 570 Discussion Questions......Page 573 Problems......Page 574 Case 17-1: REA Data Modeling Extension......Page 578 AIS in Action Solutions: Quiz Key......Page 579 Comprehensive Problem Solution......Page 583 Chapter 18: Implementing an REA Model in a Relational Database......Page 587 Integrating REA Diagrams Across Cycles......Page 588 Merging Redundant Resource Entities......Page 591 Merging Redundant Event Entities......Page 592 Step 1: Create Tables for Each Distinct Entity and M:N Relationship......Page 593 Step 2: Assign Attributes to Each Table......Page 595 Step 3: Use Foreign Keys to Implement 1:1 and 1:N Relationships......Page 596 Completeness Check......Page 597 Creating Journals and Ledgers......Page 598 Generating Financial Statements......Page 599 Summary and Case Conclusion......Page 600 AIS in Action: Chapter Quiz......Page 601 Discussion Questions......Page 602 Problems......Page 603 Case 18-1: Practical Database Design......Page 605 AIS in Action Solutions: Quiz Key......Page 606 Comprehensive Problem Solution......Page 608 Chapter 19: Special Topics in REA Modeling......Page 611 Additional Revenue Cycle Events and Attribute Placement......Page 612 Additional Expenditure Cycle Events and Attribute Placement......Page 614 Acquisition of Intangible Services......Page 617 Rental Transactions......Page 618 Relationships Between Resources and Agents......Page 620 Additional Entities—Intellectual Property......Page 621 New REA Feature......Page 623 HR Cycle Entities......Page 624 Tracking Employees’ Time......Page 625 Financing Activities Data Model......Page 626 Summary and Case Conclusion......Page 627 AIS in Action: Chapter Quiz......Page 630 Discussion Questions......Page 631 Problems......Page 632 AIS in Action Solutions: Quiz Key......Page 637 Appendix: Extending the REA Model to Include Information About Policies......Page 641 Part V: The Systems Development Process......Page 644 Chapter 20: Introduction to Systems Development and Systems Analysis......Page 645 Introduction......Page 646 The Systems Development Life Cycle......Page 648 The Players......Page 649 Planning Techniques......Page 650 Feasibility Analysis......Page 652 Capital Budgeting: Calculating Economic Feasibility......Page 653 How People Resist Change......Page 655 Preventing Behavioral Problems......Page 656 Initial Investigation......Page 657 Systems Survey......Page 658 Information Needs and Systems Requirements......Page 660 Systems Analysis Report......Page 662 Summary and Case Conclusion......Page 663 Key Terms......Page 664 AIS in Action: Chapter Quiz......Page 665 Discussion Questions......Page 666 Problems......Page 667 Case 20-1: Audio Visual Corporation......Page 675 AIS in Action Solutions: Quiz Key......Page 676 Comprehensive Problem Solution......Page 679 Chapter 21: AIS Development Strategies......Page 681 Purchasing Software......Page 682 Acquiring Hardware and Software......Page 683 Evaluating Proposals and Selecting a System......Page 684 End-User-Developed Software......Page 686 Advantages and Disadvantages of End-User Computing......Page 687 Managing and Controlling End-User Computing......Page 688 Advantages and Disadvantages of Outsourcing......Page 689 Methods for Improving Systems Development......Page 690 Business Process Management......Page 691 Prototyping......Page 692 Agile Methodologies......Page 694 Computer-Aided Software Engineering......Page 697 Key Terms......Page 698 AIS in Action: Chapter Quiz......Page 699 Discussion Questions......Page 700 Problems......Page 701 Case 21-1: Wong Engineering Corp.......Page 705 AIS in Action Solutions: Quiz Key......Page 706 Comprehensive Problem Solution......Page 708 Chapter 22: Systems Design, Implementation, and Operation......Page 709 Evaluate Design Alternatives......Page 710 Physical Systems Design......Page 712 File and Database Design......Page 713 Input Design......Page 714 Program Design......Page 715 Procedures and Controls Design......Page 716 Implementation Planning and Site Preparation......Page 717 Selecting and Training Personnel......Page 718 Testing the System......Page 719 Systems Conversion......Page 720 Operation and Maintenance......Page 721 Summary and Case Conclusion......Page 722 AIS in Action: Chapter Quiz......Page 723 Comprehensive Problem Hershey’s Big Bang ERP......Page 724 Discussion Questions......Page 725 Problems......Page 726 Case 22-1: Citizen’s Gas Company......Page 731 AIS in Action Solutions: Quiz Key......Page 732 Comprehensive Problem Solution......Page 734 Glossary......Page 735 Index......Page 756 Back Cover......Page 770 For undergraduate and graduate courses in Accounting Information Systems (AIS). A market-leading text with the most comprehensive, flexible coverage of AIS available. 'Accounting information systems' delivers the most comprehensive and flexible coverage of each major approach to teaching AIS, giving instructors the opportunity to reorder chapters and focus the material to suit their individual course needs. The 14th Edition covers all of the most recent updates in AIS, including how developments in IT affect business processes and controls, the effect of recent regulatory developments on the design and operation of accounting systems, and how accountants can use the AIS to add value to an organization. Not only will students see how AIS has changed the role of an accountant, but they'll also be prepared for a successful accounting career in public practice, industry, or government "Accounting Information Systems delivers the most comprehensive and flexible coverage of each major approach to teaching AIS, giving instructors the opportunity to reorder chapters and focus the material to suit their individual course needs. The 14th Edition covers all of the most recent updates in AIS, including how developments in IT affect business processes and controls, the effect of recent regulatory developments on the design and operation of accounting systems, and how accountants can use the AIS to add value to an organization. Not only will students see how AIS has changed the role of an accountant, but they'll also be prepared for a successful accounting career in public practice, industry, or government."--Publisher's description __For undergraduate and graduate courses in Accounting Information Systems (AIS).__**__Accounting Information Systems,__**covers all of the most recent updates in AIS, including how developments in IT affect business processes and controls, the effect of recent regulatory developments on the design and operation of accounting systems, and how accountants can use the AIS to add value to an organization. Not only will readers see how AIS has changed the role of an accountant, but they'll also be prepared for a successful accounting career in public practice, industry, or government.