Chapter 1 (AIS EXAM 1) Questions and Answers 100% correct

Chapter 1 (AIS EXAM 1) Questions and Answers 100% correct system set of two or more interrelated components that interact to achieve a goal (pg.3) information data that has been organized and processed to provide meaning and improve the decision making process (pg.3) data facts about activities (EVENTS), RESOURCES, and people (AGENTS) that are collected, recorded, stored and processed by the information system (pg.3) accounting an information system that records, classifies, and summarizes economic events in a logical manner for the purpose of providing financial information for decision making accounting information system a set of interrelated and interacting components that collects, records, stores and processes economic facts about resources, events, and agents (REA) so that it is financially meaningful to decision makers categories/types of data collected in an AIS 3 types REA: -events (like a sale, that's an event) -resources (what resources are involved in a sale? inventory, cash if cash sale) -agents (what people/agent is involved? customers, employees) Typical activities by business process/cycle business process definition: -A set of related, coordinated, and structured activities and tasks, performed by a person, a computer, or a machine, that help accomplish a specific organizational goal. Transaction cycle types: -revenue cycle -expenditure cycle -production/conversion cycle -human resources/payroll cycle -financing cycle THEN ALL SEND ECONOMIC DATA TO THE GENERAL LEDGER AND REPORTING SYSTEM THAT WILL GENERATE A SET OF FINANCIAL STATEMENTS revenue cycle (Typical activities by business process/cycle) Activities associated with selling goods and services in exchange for cash or a future promise to receive cash. - Give Goods ---------- Get Cash expenditure cycle (Typical activities by business process/cycle) Activities associated with purchasing inventory for resale or raw materials in exchange for cash or a future promise to pay cash. - Give Cash -------- Get Goods/Raw Materials production/conversion cycle (Typical activities by business process/cycle) Activities associated with using labor, raw materials, and equipment to produce finished goods. - Give Labor Give Raw Materials -- Get Finished Goods human resources/payroll cycle (Typical activities by business process/cycle) Activities associated with hiring, training, compensating, evaluating, promoting, and terminating employees. - Give Cash ------- Get Labor financing cycle (Typical activities by business process/cycle) Activities associated with raising money by selling shares in the company to investors and borrowing money as well as paying dividends and interest. - Give Cash ------ Get Cash Typical interrelated components of an AIS (part 1) (6 of them) 1)The people who use the system, designed it, implemented it 2)The procedures and instructions used to collect, process, and store data. make sure things are done systematically and have good procedures and instructions on how to do these things 3)The data about the organization and its business activities that we are collecting, our REA Typical interrelated components of an AIS (part 2) (6 of them) 4)The software used to process the data 5)The information technology infrastructure, were talking the hardware, network, infrastructure and how we go about capturing the data and using software to turn it into information 6)The internal controls and security measures that safeguard AIS data most important component of an AIS It is People! component #1 on the list -people are the ones who are engaged in the business, they are the ones designing the system, they are the ones putting it in play operating it and maintaining it -they are the ones doing and following all the other steps and components PEOPLE ARE THE MOST IMPORTANT COMPONENT OF AN AIS!!!!! Basic interrelated functions/goals of an AIS there are 3 functions: 1) collect and store data about organizational Activities, Resources, and Personnel(Agents) REA 2)transform data into information for decision makers both internal and external to the organization (what to do with that data) 3)provide adequate controls to safe guard assets and data. we use adequate because there are certain inherent weaknesses in every system of Internal control inherent weaknesses in any system of internal control, as well as other factors that influence the strength of internal control 1)one weakness is management override -the higher your up in an organization the easier it is for you to override policy's and procedures and internal control measures. some do right others abuse it 2)another weakness is collusion -collusion between employees who by themselves have duties that don't allow them to easily commit mistakes or committee fraud and it be covered up but when 2 or more employees work together they can override internal control and can really hurt an org. 3)another weakness is people make mistakes The factor that influences strength of internal control is: the cost benefit of the internal controls we implement informational characteristics 1. Relevant - reduces uncertainty, improves decision making, or confirms or corrects prior expectations 2. Reliable - free from error or bias; accurately represents organization events and activities 3. Complete - does not omit important aspects of the events or activates it measures 4. Timely - provided in time for decision makers to make decisions 5. Understandable - presents in a useful and intelligible format 6. Verifiable - two independent, knowledgeable people produce the same information 7. Accessible - available to users when they need it information characteristics that also help enhance/emphasize/improve the information characteristic of "RELEVENT" relevant is further expounded upon by timeliness and accessibility. -if I cant get information in time its irrelevant to me and if I cant get access to that information it irrelevant to me -its only the information that's accessible and I get in time that's going to be relevant to making my decision information characteristics that also help enhance/emphasize/improve the information characteristic of "RELIABLE" reliable is further expounded upon by completeness and verifiability. whether all information characteristics can be simultaneously met, or if there are instances in which tradeoffs amongst information characteristics are made and what those tradeoffs would be -it is possible to have all 7 characteristics at a high level (like him, the teacher striving to do all 7) -but there are situations where your gunna have tradeoffs and the biggest tradeoff is TIMELINESS. might have to cut slack if making a decision in a time crunch -when needing to make a decision fast you may need to cut slack on the completeness of the info, the reliability of it and the verifiability of it