Page 38 - Accounting Information Systems

C H A P TER 1 The Information System: An Accountant’s Perspective 9

The AIS is composed of three major subsystems: (1) the transaction processing system (TPS), which
supports daily business operations with numerous reports, documents, and messages for users throughout
the organization; (2) the general ledger/financial reporting system (GL/FRS), which produces the tradi-
tional financial statements, such as the income statement, balance sheet, statement of cash flows, tax
returns, and other reports required by law; and (3) the management reporting system (MRS), which pro-
vides internal management with special-purpose financial reports and information needed for decision
making such as budgets, variance reports, and responsibility reports. We examine each of these subsys-
tems later in this chapter.
The Management Information System
Management often requires information that goes beyond the capability of AIS. As organizations grow in
size and complexity, specialized functional areas emerge, requiring additional information for production
planning and control, sales forecasting, inventory warehouse planning, market research, and so on. The man-
agement information system (MIS) processes nonfinancial transactions that are not normally processed by
traditional AIS. Table 1-1 gives examples of typical MIS applications related to functional areas of a firm.

Why Is It Important to Distinguish between AIS and MIS?
SOX legislation requires that management design and implement internal controls over the entire finan-
cial reporting process. This includes the financial reporting system, the general ledger system, and the
transaction processing systems that supply the data for financial reporting. SOX further requires that man-
agement certify these controls and that the external auditors express an opinion on control effectiveness.
Because of the highly integrative nature of modern information systems, management and auditors need
a conceptual view of the information system that distinguishes key processes and areas of risk and legal
responsibility from the other (nonlegally binding) aspects of the system. Without such a model, critical
management and audit responsibilities under SOX may not be met.

AIS SUBSYSTEMS
We devote separate chapters to an in-depth study of each AIS subsystem depicted in Figure 1-3. At this
point, we briefly outline the role of each subsystem.

TAB L E
1-1 EXAMPLES OF MIS APPLICATIONS IN FUNCTIONAL AREAS

Function Examples of MIS Applications
Finance Portfolio management systems
Capital budgeting systems

Marketing Market analysis
New product development
Product analysis

Distribution Warehouse organization and scheduling
Delivery scheduling
Vehicle loading and allocation models

Personnel Human resource management systems
n Job skill tracking system
n Employee benefits system