About the Authors v
Preface vii
Acknowledgments xi
To the Students xiii
A List of Real-World Examples in This Textbook xv
Module 1 Introduction Defines business processes AIS, and all foundational concepts. This module provides the knowledge building blocks to support the remaining chapters.
1 Introduction to AIS 1
Overview of Business Processes (Study Objective 1) 1
Overview of an Accounting Information System (Study Objective 2) 4
Business Process Linkage Throughout the Supply Chain (Study Objective 3) 5
IT Enablement of Business Processes (Study Objective 4) 7
Basic Computer and IT Concepts (Study Objective 5) 10
The Internal Control Structure of Organizations (Study Objective 7) 19
The Importance of Accounting Information Systems to Accountants (Study Objective 8) 24
The Relation of Ethics to Accounting Information Systems (Study Objective 9) 25
Summary of Study Objectives 26
Key Terms 27
End of Chapter Material 28
Concept Check 28
Discussion Questions 28
Brief Exercises 29
Problems 29
Cases 31
Solutions to Concept Check 31
2 Foundational Concepts of the AIS 33
Interrelationships of Business Processes and the AIS (Study Objective 1) 34
Types of Accounting Information Systems (Study Objective 2) 36
Client-Server Computing (Study Objective 3) 40
Cloud Computing (Study Objective 4) 41
Accounting Software Market Segments (Study Objective 5) 45
Input Methods Used in Business Processes (Study Objective 6) 48
Processing Accounting Data (Study Objective 7) 50
Outputs from the AIS Related to Business Processes (Study Objective 8) 52
Documenting Processes and Systems (Study Objective 9) 53
Ethical Considerations at the Foundation of Accounting Information Systems (Study Objective 10) 61
Summary of Study Objectives 62
Key Terms 63
End of Chapter Material 64
Concept Check 64
Discussion Questions 65
Brief Exercises 65
Problems 66
Cases 67
Solutions to Concept Check 68
Module 2 Control Environment Describes the proper control environment to oversee and control processes.
3 Fraud, Ethics, and Internal Control 69
Introduction to the Need for a Code of Ethics and Internal Controls (Study Objective 1) 69
Accounting-Related Fraud (Study Objective 2) 72
The Nature of Management Fraud (Study Objective 3) 75
The Nature of Employee Fraud (Study Objective 4) 76
The Nature of Customer Fraud (Study Objective 5) 78
The Nature of Vendor Fraud (Study Objective 6) 78
The Nature of Computer Fraud (Study Objective 7) 78
Policies to Assist in the Avoidance of Fraud and Errors (Study Objective 8) 82
Maintenance of a Code of Ethics (Study Objective 9) 82
Maintenance of Accounting Internal Controls (Study Objective 10) 83
Maintenance of Information Technology Controls (Study Objective 11) 94
The Sarbanes-Oxley Act of 2002 (Study Objective 12) 96
Summary of Study Objectives 98
Key Terms 99
End of Chapter Material 100
Concept Check 100
Discussion Questions 101
Brief Exercises 101
Problems 102
Cases 103
Solutions to Concept Check 105
4 Internal Controls and Risks in IT Systems 107
An Overview of Internal Controls for IT Systems (Study Objective 1) 107
General Controls for IT Systems (Study Objective 2) 110
General Controls from an AICPA Trust Services Criteria Perspective (Study Objective 3) 120
Hardware and Software Exposures in IT Systems (Study Objective 4) 125
Application Software and Application Controls (Study Objective 5) 135
Ethical Issues in IT Systems (Study Objective 6) 143
Summary of Study Objectives 144
Key Terms 145
End of Chapter Material 146
Concept Check 146
Discussion Questions 147
Brief Exercises 147
Problems 148
Cases 149
Solutions to Concept Check 150
5 IT Governance 153
Introduction to IT Governance (Study Objective 1) 153
An Overview of the SDLC (Study Objective 2) 157
Elements of the Systems Planning Phase of the SDLC (Study Objective 3) 160
Elements of the Systems Analysis Phase of the SDLC (Study Objective 4) 163
Elements of the Systems Design Phase of the SDLC (Study Objective 5) 167
Elements of the Systems Implementation Phase of the SDLC (Study Objective 6) 174
Elements of the Operation and Maintenance Phase of the SDLC (Study Objective 7) 177
The Critical Importance of IT Governance in an Organization (Study Objective 8) 178
Ethical Considerations Related to IT Governance (Study Objective 9) 179
Summary of Study Objectives 181
Key Terms 183
End of Chapter Material 183
Concept Check 183
Discussion Questions 184
Brief Exercises 184
Problems 184
Cases 185
Solutions to Concept Check 186
6 Enterprise Resource Planning (ERP) Systems 187
Overview of ERP Systems (Study Objective 1) 187
History of ERP Systems (Study Objective 2) 192
Current ERP System Characteristics (Study Objective 3) 194
ERP Modules (Study Objective 4) 195
ERP Market Segments, Cloud Computing and Digital Transformation (Study Objective 5) 197
Implementation of ERP Systems (Study Objective 6) 201
Benefits and Risks of ERP Systems (Study Objective 7) 207
ERP Systems and the Sarbanes-Oxley Act (Study Objective 8) 210
Summary of Study Objectives 212
Key Terms 214
End of Chapter Material 214
Concept Check 214
Discussion Questions 215
Brief Exercises 215
Problems 216
Cases 216
Solutions to Concept Check 217
7 Auditing Information Technology-Based Processes 218
Introduction to Auditing IT Processes (Study Objective 1) 218
Types of Audits and Auditors (Study Objective 2) 219
Information Risk and IT-Enhanced Internal Control (Study Objective 3) 221
Authoritative Literature Used in Auditing (Study Objective 4) 222
Management Assertions and Audit Objectives (Study Objective 5) 224
Phases of an IT Audit (Study Objective 6) 225
Use of Computers in Audits (Study Objective 7) 229
Tests of Controls (Study Objective 8) 230
Tests of Transactions and Tests of Balances (Study Objective 9) 237
Audit Completion/Reporting (Study Objective 10) 239
Other Audit Considerations (Study Objective 11) 241
Ethical Issues Related to Auditing (Study Objective 12) 245
Summary of Study Objectives 248
Key Terms 249
End of Chapter Material 250
Concept Check 250
Discussion Questions 252
Brief Exercises 253
Problems 253
Cases 254
Solutions to Concept Check 254
Module 3 Business Processes The sets of business processes and the internal controls in organizations. With process maps, document flowcharts, and data flow diagrams, the core business processes are described and the necessary controls to manage risk are discussed.
8 Revenue and Cash Collection Processes and Controls 256
Introduction to Revenue Processes (Study Objective 1) 256
Sales Processes (Study Objective 2) 261
Risks and Controls in Sales Processes (Study Objective 2, Continued) 268
Sales Return Processes (Study Objective 3) 272
Risks and Controls in the Sales Return Processes (Study Objective 3, Continued) 272
Cash Collection Processes (Study Objective 4) 277
Risks and Controls in the Cash Collection Processes (Study Objective 4, Continued) 278
IT-Enabled Systems of Revenue and Cash Collection Processes (Study Objective 5) 285
E-Business Systems and the Related Risks and Controls (Study Objective 6) 287
Electronic Data Interchange (EDI) Systems and the Risks and Controls (Study Objective 7) 290
Point of Sale (POS) Systems and the Related Risks and Controls (Study Objective 8) 294
Ethical Issues Related to Revenue Processes (Study Objective 9) 295
Corporate Governance in Revenue Processes (Study Objective 10) 297
Summary of Study Objectives 298
Key Terms 300
End of Chapter Material 300
Concept Check 300
Discussion Questions 301
Brief Exercises 302
Problems 303
Cases 308
Solutions to Concept Check 312
9 Expenditures Processes and Controls--Purchases 314
Introduction to Expenditures Processes (Study Objective 1) 314
Purchasing Processes (Study Objective 2) 317
Risks and Controls in the Purchasing Process (Study Objective 2, Continued) 327
Purchase Return Process (Study Objective 3) 331
Risks and Controls in the Purchase Return Processes (Study Objective 3, Continued) 335
Cash Disbursement Processes (Study Objective 4) 337
Risks and Controls in the Cash Disbursement Processes (Study Objective 4, Continued) 343
IT Systems of Expenditures and Cash Disbursement Processes (Study Objective 5) 346
Computer-Based Matching (Study Objective 6) 348
Risks and Controls in Computer-Based Matching (Study Objective 6, Continued) 349
Evaluated Receipt Settlement (Study Objective 7) 350
Risks and Controls in Evaluated Receipt Settlement (Study Objective 7, Continued) 351
E-Business and Electronic Data Interchange (EDI) (Study Objective 8) 352
Risks and Controls in E-Business and EDI (Study Objective 8, Continued) 353
E-Payables (Study Objective 9) 355
Procurement Cards (Study Objective 10) 356
Ethical Issues Related to Expenditures Processes (Study Objective 11) 356
Corporate Governance in Expenditure Processes (Study Objective 12) 358
Summary of Study Objectives 359
Key Terms 361
End of Chapter Material 362
Concept Check 362
Discussion Questions 363
Brief Exercises 364
Problems 364
Cases 367
Solutions to Concept Check 371
10 Expenditures Processes and Controls--Payroll and Fixed Assets 373
Introduction to Payroll and Fixed Asset Processes (Study Objective 1) 373
Payroll Processes (Study Objective 2) 377
Risks and Controls in the Payroll Processes (Study Objective 3) 385
IT Systems of Payroll Processes (Study Objective 4) 387
Fixed Asset Processes (Study Objective 5) 390
Risks and Controls in Fixed Asset Processes (Study Objective 6) 398
IT Systems of Fixed Asset Processes (Study Objective 7) 401
Ethical Issues Related to Payroll and Fixed Asset Processes (Study Objective 8) 403
Corporate Governance in Payroll and Fixed Asset Processes (Study Objective 9) 405
Summary of Study Objectives 407
Key Terms 408
End of Chapter Material 408
Concept Check 408
Discussion Questions 410
Brief Exercises 410
Problems 411
Cases 412
Solutions to Concept Check 414
11 Conversion Processes and Controls 416
Basic Features of Conversion Processes (Study Objective 1) 416
Components of the Logistics Function (Study Objective 2) 419
Cost Accounting Reports Generated by Conversion Processes (Study Objective 3) 427
Risks and Controls in Conversion Processes (Study Objective 4) 428
IT Systems of Conversion Processes (Study Objective 5) 431
The Supply Chain and Enterprise (ERP) Systems (Study Objective 6) 435
Ethical Issues Related to Conversion Processes (Study Objective 7) 437
Corporate Governance in Conversion Processes (Study Objective 8) 438
Summary of Study Objectives 438
Key Terms 439
End of Chapter Material 440
Concept Check 440
Discussion Questions 441
Brief Exercises 442
Problems 443
Cases 443
Solutions to Concept Check 446
12 Administrative Processes and Controls 448
Introduction to Administrative Processes (Study Objective 1) 448
Financial Capital Processes (Study Objective 2) 451
Investment Processes (Study Objective 3) 453
Risks and Controls in Capital and Investment Processes (Study Objective 4) 454
General Ledger Processes (Study Objective 5) 455
Risks and Controls in General Ledger Processes (Study Objective 6) 459
Reporting as an Output of the General Ledger Processes (Study Objective 7) 465
Ethical Issues Related to Administrative Processes and Reporting (Study Objective 8) 467
Corporate Governance in Administrative Processes and Reporting (Study Objective 9) 469
Summary of Study Objectives 470
Key Terms 472
End of Chapter Material 472
Concept Check 472
Discussion Questions 473
Brief Exercises 473
Problems 474
Case 474
Solutions to Concept Check 475
Module 4 IT Infrastructure to Enable Processes The hardware, software, and systems that support business processes.
13 Data and Databases 476
The Need for Data Collection and Storage (Study Objective 1) 476
Storing and Accessing Data (Study Objective 2) 478
Data Processing Techniques (Study Objective 3) 480
Databases (Study Objective 4) 481
The Need for Normalized Data (Study Objective 5) 485
Use of a Data Warehouse to Analyze Data (Study Objective 6) 488
Data Analysis Tools (Study Objective 7) 491
Distributed Data Processing (Study Objective 8) 493
Cloud-Based Databases (Study Objective 9) 495
Big Data and Data Analytics (Study Objective 10) 497
IT Controls for Data and Databases (Study Objective 11) 499
Ethical Issues Related to Data Collection and Storage (Study Objective 12) 499
Summary of Study Objectives 502
Key Terms 504
End of Chapter Material 504
Concept Check 504
Discussion Questions 505
Brief Exercises 506
Problems 507
Cases 507
Solutions to Concept Check 508
14 E-Commerce and E-Business 510
Introduction to E-Commerce and E-Business (Study Objective 1) 510
The History of the Internet (Study Objective 2) 512
The Physical Structure and Standards of the Internet (Study Objective 3) 514
E-Commerce and Its Benefits (Study Objective 4) 518
Privacy Expectations in E-Commerce (Study Objective 5) 522
E-Business and IT Enablement (Study Objective 6) 523
E-Business Enablement Examples and Digital Transformation (Study Objective 7) 527
Intranets and Extranets to Enable E-Business (Study Objective 8) 530
Internal Controls for the Internet Intranets and Extranets (Study Objective 9) 532
XML and XBRL as Tools to Enable E-Business (Study Objective 10) 533
Ethical Issues Related to E-Business and E-Commerce (Study Objective 11) 536
Summary of Study Objectives 538
Key Terms 540
End of Chapter Material 540
Concept Check 540
Discussion Questions 541
Brief Exercises 541
Problems 542
Cases 542
Solutions to Concept Check 543
Index I-1
