Page 22 - Accounting Information Systems

Preface xxi

advantages and disadvantages of the major types of numeric and alphabetic coding
schemes.

Chapter 3, ‘‘Ethics, Fraud, and Internal Control’’
Chapter 3 deals with the related topics of ethics, fraud, and internal control.

• The chapter first examines ethical issues related to business and specifically to
computer systems. The questions raised are intended to stimulate class discussions.
• Next, the chapter addresses fraud. There is perhaps no area of greater controversy
for accountants than their responsibility to detect fraud. Part of the problem stems
from confusion about what constitutes fraud. This section distinguishes between
management fraud and employee fraud. The chapter presents techniques for identi-
fying unethical and dishonest management and for assessing the risk of management
fraud. Employee fraud can be prevented and detected by a system of internal con-
trols. The section discusses several fraud techniques that have been perpetrated in
both manual and computer-based environments. The results of a research study con-
ducted by the Association of Certified Fraud Examiners as well as the provisions of
the Sarbanes-Oxley Act are presented.
• The final section of the chapter describes the internal control structure and control
activities specified in SAS 78/COSO. The control concepts discussed in this chapter
are applied to specific applications in chapters that follow.

PART II: TRANSACTION CYCLES AND
BUSINESS PROCESSES
Chapter 4, ‘‘The Revenue Cycle’’; Chapter 5, ‘‘The Expenditure Cycle Part I:
Purchases and Cash Disbursements Procedures’’; and Chapter 6, ‘‘The Expenditure
Cycle Part II: Processing and Fixed Asset Procedures’’
The approach taken in all three chapters is similar. First, the business cycle is reviewed
conceptually using data flow diagrams to present key features and control points of
each major subsystem. At this point the reader has the choice of either continuing
within the context of a manual environment or moving directly to computer-based
examples. Each system is examined under two alternative technological approaches:
• Each system is first examined under automation. Automation preserves basic func-
tionality by replacing manual processes with computer programs.
• Next, each system is reengineered to incorporate real-time technology. Reengineer-
ing involves radically rethinking the business process and the work flow. The objec-
tive of reengineering is to improve operational performance and reduce costs by
identifying and eliminating non–value-added tasks.
Under each technology, the effects on operational efficiency and internal controls
are examined. This approach provides the student with a solid understanding of the
business tasks in each cycle and an awareness of how different technologies influence
changes in the operation and control of the systems.

Chapter 7, ‘‘The Conversion Cycle’’
Manufacturing systems represent a dynamic aspect of AIS. Chapter 7 discusses the
technologies and techniques used in support of two alternative manufacturing environ-
ments: traditional mass production (batch) processing and lean manufacturing. These
environments are driven by information technologies such as materials requirements
planning (MRP), manufacturing resources planning (MRP II), and enterprise resource
planning (ERP). The chapter addresses the shortcomings of the traditional cost account-
ing model as it compares to two alternative models: activity-based costing (ABC) and
value stream accounting.