Question 1
a) Discuss the difference between internal and external users information, their need and
demands on an information system.
Answer:
INTERNAL USERS
Management
Internal auditors
(10 marks)
They use the information for planning that is the development of short term and l...
This document I prepared on my own understanding as a student for my personal use. The user has
the overall responsibility to verify if everything is true and correct.
Regards
Jay Enterprises
Accounting Information Systems (AIS)
CUAC 204
Question 1
a) Discuss the difference between internal and external users information, their need and
demands on an information system. (10 marks)
Answer:
INTERNAL USERS
Management
They use the information for planning that is the development of short term and long term plans.
Management is concerned with the summarised information I.e reports and draft financial
statements.
Supervisors
Controlling activities that involve motivating employees and evaluation of people and other
resources within the organisation. Supervisors are interested in detailed information so that
they give orders and supervise effectively.
Internal auditors
They use the information that enables to access operational and internal controls . These people
are mostly interested in transanction processing systems and information flow charts so that
they can establish proper internal controls.
employees
They use the information in order to carryout their daily duties. They need information that is as
detailed as possible inorder to reduce errors. They are most information need is turn around
documents.
,External users
Tax accountants must understand the client’s AIS adequately to be confident that it is providing
complete and accurate information for tax planning and compliance work.
Potential investors
They want information that will enable them to access the feasibility of investing their funds in a
particular entity or to withdraw their funds and invest it else where. Information can be obtained
from the SOFP, SOCI and SOCE
Creditors
They want to access the ability of the company to settle its debts. They are interested information
that varifies the liquidty position of the business as well as existence and ownership of assets
that may want to be used as colleteral.
Debtors
They are mainly concerned about the going concern of a company. They will look for management
assertions as to the ability of the firm to continue operating into the forseable future.This will
assure them if the company is able to supply them with raw materials in the future(continued
business).
b) Distinguish between Accounting Information Systems (AIS) and Management Information
Systems (MIS). (10 marks)
AIS is concerned about day to day running of the business with subsystems such as Transaction
Processing System (TPS).
MIS is mainly used for strategic planning which involves identifying a company’s long run goal and
developing plans for achieving these goals.
AIS records financial transactions which are economic events that affect assets and equities of a
firm and is measured in monetary terms for instance sale of goods to customers cash movements
etc.
,MIS goes beyond AIS in that it records financial transactions and non-financial transactions.
AIS provides information for internal and external use
MIS MIS principally provides information to internal parties.
AIS is used as a tool for short term decision making.
MIS gives data for long term decision making and control.
AIS uses historical data.
MIS is futuristic that is decisions are made based on projections.
AIS supports stewardship management with information contained in the financial statements and
responsibility report. Information is about how resources are utilised and safeguarded.
MIS is used as a yardstick for measuring performance. Managers make future projections and
hence actual results are compared with the projections made.
AIS provide information that conforms to Generally Accepted Accounting Principles (GAAP).
MIS - Albright (2006) goes on to say it is produced in a variety of formats that meet the particular
information needs of a company’s managers.
Question 2
Discuss the importance of accounting independence in Accounting Information Systems. Give where
this concept is important. (20 marks)
Definition of terms
Accounting independence: The state where the accounting department is free from any bias or undue
influence
Accounting information systems: A combination of components in the organisation that deal with the
collection, processing, management and generation of mainly economic transanctions expressed in
monetary terms.
1. Reliability
, Accounting information needs to be independent so that it can be relied upon by both internal and
external users. According to James A Hall, reliabilty is the abilty of information to be trusted to influence
a certain individual's actions. If the accounting department is not independent, it may be difficult to rely
on such information
2. Decision making
Accounting information needs to be independent so that it can be used in decision making. The decision
making that is done in accounting affect all department so it is necessary for the information to be
independent to facilitate fair decision making
3. Neutrality
Accounting information needs to be independent so that it can maintain its neutrality. Neutrality is a
prerequisite for faithful representation of financial information. If information is affected or influenced
by other departments, then it loses its neitrality
4.Credibility
Accounting informations needs to be independent so that it can be credible when it is presented.
Reports from the accounting department should be validating and enhacing the appeal of companies
5. Standard requirements
A lack of independence may lead to a failure to fulfill professional requirements to obtain
enough evidence. Failure to do this undermines the credibility of the accountancy profession and
standards it enforces
6. Proper support
The accounting department supports other departments with information but does not actively
participate in them. This calls for independence for this support to serve the true goal for which it is
confered.
7. Allocation of resources
The accounting department needs to be independent so that it can allocate resources efficiently. This is
the department which is responsible for the overal custody and destribution of resources in the
organisation so it needs to be independent for an objective allocation
8. Proper maintainance
The accounting depatment must be separate and independent of the functional areas maintaining
resources. This is because even the departments such as the stores department are monitored
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