understanding business processes Brett CONSIDINE Alison PARKES Yvette BLOUNT

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1 Accounting INFORMATION Systems understanding business processes 4t h edition Brett CONSIDINE Alison PARKES Karin OLESEN Yvette BLOUNT Derek SPEER WILEY John Wiley & Sons Australia, Ltd

2 PREFACE x ACKNOWLEDGEMENTS xii PART 1 Systems fundamentale 1 CHARTER 1 Introduction 3 What is an accounting Information system? Accounting Information 7 AIS FOCUS 1.1 Woolworths' pursuit of customer intimacy System Definition and evolution of accounting Information systems The role of accounting and accounting Information 15 AIS FOCUS 1.2 Using data in the Organisation 17 Where next? 18 AIS FOCUS 1.3 Cyber criminals targeting small businesses 23 AIS FOCUS 1.4 Fast track to recovery 24 AIS FOCUS 1.5 The Royal Australian Mint's system Upgrade 30 Summary 32 Key terms 33 Discussion questions 33 Self-test activities 33 Problems 34 Further reading 36 Self-test answers 36 End notes 36 PART 2 Systems characteristics and considerations 39 CHARTER 2 Business processes Organisational strategy and mission 42 AIS FOCUS 2.1 ALDI in the Australian supermarket industry Organisational design What is a business process? Why business processes? 52 AIS FOCUS 2.2 Outsourcing opens doors in global vi Hage 54 AIS FOCUS 2.3 Telstra's outsourcing and restructuring ERP systems, business processes and best practice Issues in moving to a business processbased environment Changing business processes 60 AIS FOCUS 2.4 Moraitis lengths ahead BPR evaluated What are Australian organisations doing with Information technology and processes? 78 Summary 87 Key terms 88 Discussion questions 89 Self-test activities 89 Problems 90 Further reading 96 Self-test answers 96 End notes 96 CHARTER 3 Database concepts I 101 AIS FOCUS 3.1 Bart Construction Industries The role of databases in decision making and reporting systems Database concepts Data redundancy Database models Database modelling, design and implementation of relational databases Database design 117 AIS FOCUS 3.2 Aquaplan Limited 127 Summary 129 Key terms 130 Discussion questions 130 Self-test activities 132 Problems 133 Further reading 137 Self-test answers 137 CHARTER 4 Database concepts II 139 Top-down versus bottom-up database design Normalisation and database design Different ways a business works = different data structures Enterprise models The REA accounting model Differences between REA and E-R modelling Database implementation 174 vi

3 Summary 177 Key terms 178 Discussion questions 178 Seif test activities 178 Problems 179 Further reading 198 Self-test answers 198 End notes 198 CHARTERS XBRLreporting The role of XBRL in decision making and reporting systems XBRL concepts Benefits of XBRL Typical users of XBRL 211 AIS FOCUS 5.1 G-20 countries that use XBRL Different ways to apply XBRL tags Additional detail and language of XBRL tags 217 Summary 221 Key terms 222 Discussion questions 223 Self-test activities 223 Problems 223 Further reading 226 Self-test answers 227 End notes 227 CHARTER 6 Systems documentation The purpose and role of systems documentation Process redesign and re-engineering, and systems documentation Organisational memory and change The law and systems documentation Reading systems documentation 234 AIS FOCUS 6.1 The role of Software in systems documentation Balancing a data flow diagram Drawing systems documentation Comparing the different documentation techniques 274 Summary 275 Key terms 276 Discussion questions 276 Self-test activities 277 Problems 279 Self-test answers 286 End notes 286 CHARTER? Internal controls I Corporate governance Corporate governance in Australia 294 AIS FOCUS 7.1 Availability of Information to shareholders IT governance IT governance frameworks and Standards 300 AIS FOCUS 7.2 Australia leading the way in IT governance Standards 304 AIS FOCUS 7.3 Governance issues in the Organisation Internal control What makes up an internal control system? 308 AIS FOCUS 7.4 Fuel prices and financials 310 AIS FOCUS 7.5 Disaster recovery options Identifying risks COSO and COBIT ERM expanding COSO 321 AIS FOCUS 7.6 Corporate governance, financial reporting... what eise? 322 Summary 323 Key terms 324 Discussion questions 325 Self-test activities 325 Problems 327 Further reading 328 Self-test answers 328 End notes 328 CHARTER 8 Internal controls II Control activities, business processes and accounting Types of control activities 335 AIS FOCUS 8.1 Control types in the professions COSO, COBIT and control activities Aims of a computerised accounting Information system General controls 344 AIS FOCUS 8.2 How secure is our system? Application controls 352 AIS FOCUS 8.3 A million dollar data entry error 357 AIS FOCUS 8.4 Processing banking data 362 AIS FOCUS 8.5 Controls in practice Disaster recovery plans 364 AIS FOCUS 8.6 Sydney disaster recovery plan Execution of internal control Documenting controls 367 vii

4 8.10 The limitations of controls 370 AIS FOCUS 8.7 Identity fraud 372 AIS FOCUS 8.8 Denial-of-service attacks 374 Summary 374 Key terms 376 Discussion questions 376 Self-test activities 377 Problems 377 Self-test answers 388 End notes 388 PART 3 Systems in action 393 CHARTERS! Transaction cycle the revenue cycle 39? 9.1 Revenue cycle overview and key objectives 398 AIS FOCUS 9.1 Simply Energy Technologies underpinning the revenue cycle 401 AIS FOCUS 9.2 Caffe Primo Chain Data and decisions in the revenue cycle Revenue cycle documentation Revenue cycle activities and related risks and controls Measuring revenue cycle Performance 431 Summary 433 Key terms 434 Discussion questions 434 Self-test activities 435 Problems 436 Further reading 442 Self-test answers 442 End notes 442 CHARTER 10 Transaction cycle the expenditure cycle Expenditure cycle overview and key objectives Technologies underpinning the expenditure cycle 447 AIS FOCUS 10.1 Getting behind the scenes managing your supply chain Data and decisions in the expenditure cycle 448 AIS FOCUS 10.2 Accounts payable processing at Telstra Expenditure cycle documentation Expenditure cycle activities and related risks and controls Measuring expenditure cycle Performance 480 Summary 481 Key terms 482 Discussion questions 482 Self-test activities 483 Problems 484 Further reading 490 Self-test answers 490 End notes 490 CHARTER 11 Transaction cycle the production cycle Production cycle overview and key objectives Technologies underpinning the production cycle 494 AIS FOCUS 11.1 Steel-Line Garage Doors production line display Data and decisions in the production cycle 496 AIS FOCUS 11.2 Best Strategie sustainability outcomes Production cycle documentation Production cycle activities and related risks and controls Measuring production cycle Performance 527 Summary 527 Key terms 529 Discussion questions 529 Self-test activities 530 Problems 531 Further reading 537 Self-test answers 537 End notes 537 CHARTER 12 Transaction cycle the HR management and payroll cycle HR management and payroll cycle overview and key objectives 540 AIS FOCUS 12.1 The value of position descriptions Technologies underpinning the HR management and payroll cycle Data and the HR management and payroll cycle 544 AIS FOCUS 12.2 Recruitment system case study HR management and payroll cycle documentation HR management and payroll cycle activities, and the related controls and risks Measuring HR management and payroll process Performance 570 Summary 570 Key terms 572 Discussion questions 572 Self-test activities 573 viii

5 Problems 574 Further reading 578 Self-test answers 578 CHARTER 13 Transaction cycle the general ledger and financial reporting cycle General ledger and financial reporting cycle overview and key objectives Technologies underpinning the general ledger and financial reporting cycle 584 AIS FOCUS 13.1 Storm clouds ahead: some pros and cons of data in the cloud Data and decisions in the general ledger and financial reporting cycle 585 AIS FOCUS 13.2 School settled with Greentree for good General ledger and financial reporting cycle documentation General ledger and financial reporting cycle activities and related risks and controls Measuring general ledger and financial reporting cycle Performance 614 Summary 615 Key terms 617 Discussion questions 617 Self-test activities 618 Problems 619 Further reading 626 Self-test answers 626 End notes 626 PART 4 Systems issues 627 CHARTER 14 Systems development Business size and complexity Systems development lifecycle 631 AIS FOCUS 14.1 Supermarkets changing the way you shop 633 AIS FOCUS 14.2 Selecting a vendor based on RFPs Software selection for SMEs Alternative systems development approaches Typical problems of systems development Systems development management tools 659 AIS FOCUS 14.3 An integrated medical record system 663 Summary 666 Key terms 668 Discussion questions 668 Self-test activities 669 Problems 670 Further reading 674 Self-test answers 674 End notes 675 CHARTER 15 Auditing and governance of accounting Information systems Importance of the audit function Internal auditing External auditing Audit committees Influences on the auditor Financial (statutory) audit Information systems audit 686 AIS FOCUS 15.1 Westpac and cloud Computing 688 AIS FOCUS 15.2 COB1T and IT governance case studies 690 AIS FOCUS 15.3 Protecting customer data 703 Summary 707 Key terms 708 Discussion questions 708 Self-test activities 708 Problems 709 Further reading 713 Self-test answers 713 End notes 713 CHARTER 16 Ethics and cybercrime The importance of ethics Ethical decision making Ethical issues in AIS 722 AIS FOCUS 16.1 Sony data breach 722 AIS FOCUS 16.2 RFID: the good, the bad and the ugly Cybercrime 728 AIS FOCUS 16.3 News of the World Internet fraud and scams Reducing the risk of cybercrime Future trends and issues with new technologies 734 Summary 736 Key terms 737 Discussion questions 737 Self-test activities 737 Problems 738 Further reading 739 Self-test answers 740 End notes 740 GL0SSARY 743 INDEX 751 ix

COPYRIGHTED MATERIAL. Systems fundamentals 1. Systems characteristics and considerations 33. Introduction 2. Business processes 34

COPYRIGHTED MATERIAL. Systems fundamentals 1. Systems characteristics and considerations 33. Introduction 2. Business processes 34 Contents About the authors iii Preface xi Part 1 Systems fundamentals 1 chapter 1 Introduction 2 Introduction 3 1.1 What is an accounting information system? 4 Accounting 4 1.2 Data and information explained