Solutions Manual for f f
Core Concepts of
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Accounting f
f Information Systems, f
14e Mark Simkin,
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James Worrell,
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fArline Savage (All f f
Chapters) f
, Core Concepts of Accounting Information Systems, 14th Edition, by Simkin, Worrell and Savage
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Chapter 1 f
ACCOUNTING INFORMATION SYSTEMS AND THE ACCOUNTANT f f f f f
Discussion Questions f
1-1. The answer to this question will vary with each university’s location. However, it is
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likely most students will reveal that their parents are employed in non-manufacturing jobs.
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Instructors may wish to emphasize that the large numbers of service sector employees and
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knowledge workers reflect a trend.
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1-2. This question encourages students to think about some of the information reporting
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limitations imposed by the traditional accounting general ledger architecture. Other business
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activities (or business events) that do not require journal entries include (1) obtaining a line of
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credit, (2) issuing purchase requisitions or purchase orders, (3) signing contracts, (4) hiring a
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new executive, and (5) sending financial information to investors or bank loan personnel.
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Instructors may wish to point out that important information about a company’s business
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activities may be included in an annual report outside the financial statements. The management
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letters and footnotes in annual reports may reveal much about a company’s future prospects.
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Managers have access to much more information than what is published in financial reports.
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Whether or not they would like to have access to more non-financial information, or if they would
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prefer that the accounting information system capture data about business events rather than
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accounting transactions, is debatable. It may also be a function of the accounting system ina
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particular company. Investors may wish to have more information available to them but the
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downside is that too much information can be just as problematic as too little information.
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1-3. The financial accounting systems we have known for more than 500 years are changing
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dramatically as a result of advances in information technology and financial accountingsoftware.
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For example, databases allow accountants to collect and store all the data (accounting transaction
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data and non-financial data) about a business activity or event in one system, allowing those
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needing such information to retrieve it quickly, efficiently, and specifically in anyformat they
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wish. Financial data can also be more easily linked to nonfinancial data because of database
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technology. Thus, it is likely that financial reporting will undergo tremendous change in the next
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few years as we learn to use technology, including artificial intelligence, more effectively in the
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design of AISs.
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ERP systems are another example of the information age's impact on financial accounting. Now,
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organizations capture more financial and non-financial data and produce more information than
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ever before. This allows companies to integrate their information systems, better forecast
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everything from raw materials requirements to finished product production, and to perform more
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sophisticated analyses of important business functions. For instance, sales can be examined at
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many different levels and organized according to criteria such as geography, customer, product, or
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salesperson.
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SM 1.1 f
, Core Concepts of Accounting Information Systems, 14th Edition, by Simkin, Worrell and Savage
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One of the most important changes in AISs is the way these systems will gather financial
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information in the future. Although many of these systems will continue to capture data in
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traditional batch mode or at POS sites, we expect newer systems to collect more of it on mobile
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devices—for example, cell phones, PDAs, and digital cameras. Because more employees and
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working at home these days, “digital commuting” may be another trend.
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1-4. The objective of a company’s financial statements is to communicate relevant financial f f f f f f f f f f f
information to such external parties as stockholders, investors, and government agencies. Issuing
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financial statements in XBRL formats contributes to this objective by making such financial data
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more searchable, comparable, informative, and therefore useful. Also, because XBRL enables
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companies to use standard tags to identify specific accounting values, thelanguage itself imposes a
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greater degree of standardization in the informational content of the reports. Finally, XBRL
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helps government agencies gather financial data that are more consistent, easier to understand,
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self-checking, and more quickly communicated. Chapter 2 contains more about XBRL, including
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the idea that the language also enables its users to verify accounting relationships as assets =
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liabilities + stockholder equity.
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1-5. The questions asked here about suspicious activity reporting (SAR) require opinions f f f f f f f f f f
from students. Regarding the first question, which asks if SAR activity should be a legal matter,
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there is little room for disagreement because so much of SAR is mandated by federal legislation
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such as the Annunzio-Wylie Anti-Money Laundering Act of 1992, the Bank Secrecy Act of 1996,
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and the Patriot Act of 2001. Although there are statistics on the number of SAR filings, less is
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known about how much of what appears to be suspicious are in fact violations of federal statutes.
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1-6. The example given in the question demonstrates one way in which computerization f f f f f f f f f f f
has refined cost estimation and thus has impacted managerial accounting. However, IT has
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impacted almost every area of managerial accounting (and decision making). Consider, for
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example, the emergence of such concepts as just-in-time systems, computer integrated
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manufacturing systems, manufacturing resource planning systems, target costing, and activity
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based costing – all of these require IT to support managerial decision making. Forecasting and
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budgeting are other areas of managerial accounting impacted by advances in technology, as are
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the many applications of spreadsheet software, decision support systems, and expert systems.
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Universities are also impacted by the many advances in IT. You might have students type f f f f f f f f f f f f f f
“university use of scorecards” in their favorite browser to discover the many uses this tool offersto
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administrators in an academic environment. The search results show a variety of uses at such
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universities as The Ohio State University, CSU-Stanislaus, Clemson University, Colorado State
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University, San Jose State University, and others. For example, the University of Denver adapted
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a version of the Balanced Scorecard to evaluate their Student Life Assessment Plan (SLAP),
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which focuses on Learning Outcomes. San Jose State University uses a Scorecard to evaluate and
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continuously improve their online programs.
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1-7. The AICPA website lists hundreds of potential assurance services for CPAs to offer. f f f f f f f f f f f f
These include Trust Services and Information Integrity, Guidance on Audit Data Analytics,
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XBRL Assurance Services, and Systems and Organization Controls for Cybersecurity,
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SM 1.2 f
, Core Concepts of Accounting Information Systems, 14th Edition, by Simkin, Worrell and Savage
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Outsourced Services and Vendor Supply Chains. Several of the assurance services are in the
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information technology management/security category. Classroom discussion might address the
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particular skills that CPAs would need for each of the proposed assurance service areas.
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Skepticism and integrity, for example, are two characteristics typically associated with public
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accountants.
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It is interesting to learn which of the existing or proposed assurance services recommended by
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the AICPA will actually be offered by a given public accounting organization. Many of the
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larger firms already offer at least some of these services, and the largest accounting firms today
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derive a large portion of their revenues from professional services other than auditing and tax
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consulting. But the industry shake-up in 2002 may also prompt some accounting firms to scale
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back services and focus more on their auditing business.
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1-8. This question asks students to interview auditors from professional service firms and f f f f f f f f f f f
asks them whether or not the firms offer any assurance services. Hopefully, several firms do offer
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such services and instructors can use this as point of departure for additional discussion about
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such work.
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1-9. Almost every traditional accounting job today requires at least some information f f f f f f f f f f
systems skills. In addition, there are many job opportunities that require combined skills in both
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accounting and information systems. Consulting is one key area. Consultants with these skill sets
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can work at helping companies choose and install accounting software. They can also help
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companies with reviews of their business processes. Evaluating information systems security is
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another area of consulting where accounting and information systems skills are valuable. Tax
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planning, preparation, and consulting are yet other areas.
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Prior research suggests that it is easier to train an accountant in information systems than vice
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versa. Whether this is true or not, it is certainly clear that accounting students with information
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systems skills are valuable employees. Individuals who are technically skilled at computers but
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lack knowledge about accounting concepts are handicapped when trying to help a company to
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develop and enhance its information systems. Their lack of accounting skills may lead their
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employer to install information systems that fail to meet their needs.
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1-10. Employers of both accounting and IS personnel often rank “analytical reasoning” and f f f f f f f f f f f
“writing” skills on the same priority as technical skills, and some rank them even higher. Said one
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recruiter at the school of one author: “I can train new employees to use our computer systems and
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perform the majority of the technical tasks we will require of them. What I cannot train them to do
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is to think analytically or logically. And what I refuse to do is to teach them to speak and write
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clearly and effectively—skills they should have learned in high school.” Another recruiter said it
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slightly differently: “Give me a technically-competent accounting or IS student who can perform
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AIS tasks well, and I will pay them X dollars. Give me a student who can explain to my clients
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how our services can solve their business problems and I will pay them2X dollars.”
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There are several other attributes beyond “analytical thinking” and “writing” skills that many
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employers also value highly. One of them is “teamwork”—i.e., the ease and willingness of an
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SM 1.3 f
