Page 33 - Accounting Information Systems

4 PART I Overview of Accounting Information Systems

Five AIS models are examined. The final section discusses the role of accountants as users, designers,
and auditors of AIS.

The Information Environment

We begin the study of AIS with the recognition that information is a business resource. Like the other
business resources of raw materials, capital, and labor, information is vital to the survival of the contem-
porary business organization. Every business day, vast quantities of information flow to decision makers
and other users to meet a variety of internal needs. In addition, information flows out from the organiza-
tion to external users, such as customers, suppliers, and stakeholders who have an interest in the firm.
Figure 1-1 presents an overview of these internal and external information flows.
The pyramid in Figure 1-1 shows the business organization divided horizontally into several levels of
activity. Business operations form the base of the pyramid. These activities consist of the product-ori-
ented work of the organization, such as manufacturing, sales, and distribution. Above the base level, the
organization is divided into three management tiers: operations management, middle management, and
top management. Operations management is directly responsible for controlling day-to-day operations.
Middle management is accountable for the short-term planning and coordination of activities necessary to
accomplish organizational objectives. Top management is responsible for longer-term planning and set-
ting organizational objectives. Every individual in the organization, from business operations to top man-
agement, needs information to accomplish his or her tasks.
Notice in Figure 1-1 how information flows in two directions within the organization: horizontally and
vertically. The horizontal flow supports operations-level tasks with highly detailed information about the
many business transactions affecting the firm. This includes information about events such as the sale and
shipment of goods, the use of labor and materials in the production process, and internal transfers of resour-
ces from one department to another. The vertical flow distributes information downward from senior manag-
ers to junior managers and operations personnel in the form of instructions, quotas, and budgets. In addition,
summarized information pertaining to operations and other activities flows upward to managers at all levels.
Management uses this information to support its various planning and control functions.

FI GU RE
1-1 INTERNAL AND EXTERNAL FLOWS OF INFORMATION

Top
Management Stakeholders

Middle
Management
Budget Information Management Performance Information Suppliers
and Instructions
Operations

Customers
Operations Personnel
Day-to-Day Operations Information