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
PREFACE x ACKNOWLEDGEMENTS xii PART 1 Systems fundamentale 1 CHARTER 1 Introduction 3 What is an accounting Information system? 4 1.1 Accounting 4 1.2 Information 7 AIS FOCUS 1.1 Woolworths' pursuit of customer intimacy 9 1.3 System 10 1.4 Definition and evolution of accounting Information systems 12 1.5 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 41 2.1 Organisational strategy and mission 42 AIS FOCUS 2.1 ALDI in the Australian supermarket industry 45 2.2 Organisational design 46 2.3 What is a business process? 49 2.4 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 55 2.5 ERP systems, business processes and best practice 56 2.6 Issues in moving to a business processbased environment 58 2.7 Changing business processes 60 AIS FOCUS 2.4 Moraitis lengths ahead 76 2.8 BPR evaluated 77 2.9 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 102 3.1 The role of databases in decision making and reporting systems 103 3.2 Database concepts 104 3.3 Data redundancy 107 3.4 Database models 109 3.5 Database modelling, design and implementation of relational databases 113 3.6 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 140 4.1 Normalisation and database design 141 4.2 Different ways a business works = different data structures 157 4.3 Enterprise models 159 4.4 The REA accounting model 168 4.5 Differences between REA and E-R modelling 173 4.6 Database implementation 174 vi
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 199 5.1 The role of XBRL in decision making and reporting systems 200 5.2 XBRL concepts 202 5.3 Benefits of XBRL 208 5.4 Typical users of XBRL 211 AIS FOCUS 5.1 G-20 countries that use XBRL 212 5.5 Different ways to apply XBRL tags 216 5.6 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 229 6.1 The purpose and role of systems documentation 230 6.2 Process redesign and re-engineering, and systems documentation 231 6.3 Organisational memory and change 232 6.4 The law and systems documentation 233 6.5 Reading systems documentation 234 AIS FOCUS 6.1 The role of Software in systems documentation 235 6.6 Balancing a data flow diagram 255 6.7 Drawing systems documentation 256 6.8 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 289 7.1 Corporate governance 290 7.2 Corporate governance in Australia 294 AIS FOCUS 7.1 Availability of Information to shareholders 295 7.3 IT governance 298 7.4 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 304 7.5 Internal control 305 7.6 What makes up an internal control system? 308 AIS FOCUS 7.4 Fuel prices and financials 310 AIS FOCUS 7.5 Disaster recovery options 311 7.7 Identifying risks 316 7.8 COSO and COBIT 320 7.9 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 333 8.1 Control activities, business processes and accounting 334 8.2 Types of control activities 335 AIS FOCUS 8.1 Control types in the professions 338 8.3 COSO, COBIT and control activities 340 8.4 Aims of a computerised accounting Information system 342 8.5 General controls 344 AIS FOCUS 8.2 How secure is our system? 350 8.6 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 363 8.7 Disaster recovery plans 364 AIS FOCUS 8.6 Sydney disaster recovery plan 366 8.8 Execution of internal control 366 8.9 Documenting controls 367 vii
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 400 9.2 Technologies underpinning the revenue cycle 401 AIS FOCUS 9.2 Caffe Primo Chain 402 9.3 Data and decisions in the revenue cycle 403 9.4 Revenue cycle documentation 404 9.5 Revenue cycle activities and related risks and controls 410 9.6 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 443 10.1 Expenditure cycle overview and key objectives 444 10.2 Technologies underpinning the expenditure cycle 447 AIS FOCUS 10.1 Getting behind the scenes managing your supply chain 447 10.3 Data and decisions in the expenditure cycle 448 AIS FOCUS 10.2 Accounts payable processing at Telstra 450 10.4 Expenditure cycle documentation 451 10.5 Expenditure cycle activities and related risks and controls 457 10.6 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 491 11.1 Production cycle overview and key objectives 492 11.2 Technologies underpinning the production cycle 494 AIS FOCUS 11.1 Steel-Line Garage Doors production line display 495 11.3 Data and decisions in the production cycle 496 AIS FOCUS 11.2 Best Strategie sustainability outcomes 498 11.4 Production cycle documentation 498 11.5 Production cycle activities and related risks and controls 505 11.6 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 539 12.1 HR management and payroll cycle overview and key objectives 540 AIS FOCUS 12.1 The value of position descriptions 543 12.2 Technologies underpinning the HR management and payroll cycle 543 12.3 Data and the HR management and payroll cycle 544 AIS FOCUS 12.2 Recruitment system case study 545 12.4 HR management and payroll cycle documentation 546 12.5 HR management and payroll cycle activities, and the related controls and risks 553 12.6 Measuring HR management and payroll process Performance 570 Summary 570 Key terms 572 Discussion questions 572 Self-test activities 573 viii
Problems 574 Further reading 578 Self-test answers 578 CHARTER 13 Transaction cycle the general ledger and financial reporting cycle 579 13.1 General ledger and financial reporting cycle overview and key objectives 580 13.2 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 585 13.3 Data and decisions in the general ledger and financial reporting cycle 585 AIS FOCUS 13.2 School settled with Greentree for good 587 13.4 General ledger and financial reporting cycle documentation 589 13.5 General ledger and financial reporting cycle activities and related risks and controls 596 13.6 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 629 14.1 Business size and complexity 630 14.2 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 645 14.3 Software selection for SMEs 652 14.4 Alternative systems development approaches 655 14.5 Typical problems of systems development 657 14.6 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 679 15.1 Importance of the audit function 680 15.2 Internal auditing 681 15.3 External auditing 681 15.4 Audit committees 682 15.5 Influences on the auditor 683 15.6 Financial (statutory) audit 684 15.7 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 715 16.1 The importance of ethics 716 16.2 Ethical decision making 719 16.3 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 724 16.4 Cybercrime 728 AIS FOCUS 16.3 News of the World 730 16.5 Internet fraud and scams 731 16.6 Reducing the risk of cybercrime 733 16.7 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